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Execution is key to Drive Revenue Growth Est. Vs. Actual for Q1FY26: Revenue – MISS; EBITDA Margin – MISS; PAT– MISS Change in Estimates post Q1FY26 (Abs.) FY26E/FY27E- Revenue: -13%/12%; EBITDA: -11%/15%; PAT: -28%/10% Recommendation Rationale

Recommendation Rationale

• Robust Order Book: As of 30th June’25, the company’s order book stood at Rs 6,514 Cr, supported by an order inflow of Rs 107 Cr in Q1FY26. For FY26, the management expects an order inflow of Rs 7,000–7,500 Cr with Adani Group and Rs 2,000 Cr individually. The strong order backlog ensures revenue visibility over the next 2 years, with the company projected to deliver a revenue CAGR of 33% over FY25–27E.

• Revenue to Grow as Execution Picks Up: Project execution in Q1FY26 was slower than anticipated, primarily due to labour shortages and early monsoons. However, with execution expected to pick up meaningfully, revenue growth should see a notable improvement from H2FY26.

• EBITDA Margins Under Pressure: EBITDA margins were impacted by delayed execution, increased employee costs, ECL provisions, and expenses incurred for UP projects. The management has guided margins to be in the range of 8–9% in FY26.

Sector Outlook: Positive Company Outlook & Guidance: The company has guided EBITDA margin in the range of 8-9%, and an order inflow of Rs 7,000-7,500 Cr in FY26. Current Valuation: 15x FY27E EPS (Earlier Valuation: 10x FY27E EPS) Current TP: Rs 765/share (Earlier TP: Rs 605/share) Recommendation: We maintain HOLD on the stock

Financial Performance

PSP Projects Ltd. (PSPPL) reported a weak set of numbers in Q1FY26 due to slower-thanexpected execution caused by a 19% labour shortage. The company posted revenue of Rs 518 Cr (down 17% YoY), EBITDA of Rs 25 Cr (down 66% YoY), and APAT of Rs 1 Cr (down 98% YoY). EBITDA margins stood at 4.8% in Q1FY26 (vs. the estimate of 8.8%), compared to 11.9% in Q1FY25. The increase in employee cost was driven by new order wins from Adani, necessitating hiring at various levels.

The order book break-up is as follows: 45% of the total order book is from the Government (Rs 2936 Cr), 4% from Industrial (Rs 247 Cr), 43% from Institutional (Rs 2810 Cr), and 8% from Residential (Rs 520 Cr).

Outlook

The construction industry’s outlook remains positive from a medium to long-term perspective. PSPPL has a robust order book comprising both public and private sector projects, providing revenue visibility for the next two years. The company is well-positioned to capitalise on growth opportunities in the sector, supported by a strong bidding pipeline and the government’s focus on urban infrastructure development. However, execution remains crucial for revenue and margin growth. PSPPL is expected to report a Revenue/EBITDA/APAT CAGR of 33%/46%/87% over FY25-27E.

Valuation & Recommendation

The stock is currently trading on 29x/15x FY26E/FY27E EPS. We maintain our rating to HOLD on the stock with a TP of Rs 765/share, implying downside potential of 1% from the CMP.

Key Concall Highlights

• Order Book: As of 30th Jun’25, the company’s order book stands at Rs 6514 Cr. Of these, 45% of projects are from the government and 55% are from private players. The company achieved an order inflow of Rs 107 Cr in Q1FY26.

• Bidding Pipeline: The bid pipeline for projects with Adani Group in FY26 is around Rs 7800 Cr, with most projects from Gujarat.

• Capex: In Q1FY26, the company incurred capex of Rs 32 Cr. For FY26, the capex guidance will be 4-5%.

• As of 30th June’25, Short Term Debt was Rs 338 Cr, Fixed Deposits stood at Rs 268 Cr, Unbilled Revenue stood at Rs 566 Cr, Retention Money stood at Rs 137 Cr, Mobilisation Advance stood at Rs 326 Cr, and Inventory stood at Rs 344 Cr.

Key Risks to Our Estimates and TP

• Lower execution than expected may derail the revenue growth guidance.

• Higher input costs may impact the company’s EBITDA margins.

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