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Better Order Book Visibility but Margin Compression Ahead

We maintain our REDUCE rating on PSPPL with a TP of INR 720/sh ,which implies a downside of 4.3% from CMP.

Our core investment thesis on PSPPL remains unchanged: With the entry of Adani Group entity (Adani Infra) as a promoter shareholder, we believe there is better order book visibility. However, in this SPA & Open Offer deal (details mentioned below), margin compression is likely to be seen ahead. PSPPL management has indicated that business from the Adani Group will be executed on a cost-plus basis. In our view, Adani Group is a cost champion and would strive to get the best deal for their shareholders, which implies potential pressure on PSPPL’s margin,

In this kind of a structure, the lucrative upside optionality in PSPPL stock is automatically traded off for downside protection. In our view, this now makes the stock behave more like a fixed income instrument.

We would consider reviewing our outlook on PSPPL with a more constructive lens if there is a credible evidence that the company receives higher volumes of better-margin business from Adani as compared to other opportunities.

Valuation:

We take a more holistic approach to valuing PSPPL using a DCFbased model. The model takes into consideration 10-year explicit forecast period up to 2035E and terminal growth rate of 2%, which yields a TP of INR 720/share.

Risks:

Large volumes of low-margin deals from Adani and PSPPL’s inclination to forgo Adani deals for other more lucrative opportunities.

Q2FY26: Good Results in a Tough Quarter

* PSPPL reported Q2FY26 consolidated revenues at INR 7,028Mn, up 19.9% YoY and 35.8% QoQ vs CIE est. of INR 7,245Mn. It delivered healthy revenue growth in a typically seasonal soft quarter.

* EBITDA for Q2FY26 was reported at INR 499Mn, up 32.8% YoY and 101.4% QoQ vs CIE est. of INR 405Mn. Q2FY26 EBITDA margin came in at 7.1% vs 6.4% in Q2FY25 and 4.8% in Q1FY26 vs CIE est. of 5.6%.

Management Call — Highlights

Financials:

* The working capital cycle increased to 102 days from 65 days. The increase is because majority of sales were booked only in September as a result of monsoon and labour shortage in July/August.

* Order inflow during the period was INR 40.1Bn (ex-GST).

* PSPPL has incurred a capex of INR 410Mn in Q2FY26.

* The SDB (Surat Diamond Bourse) project has pending receivables of INR 900Mn. While the client has now agreed to pay interest on the dues, they are facing delays due to slower office sales and have requested additional time for payment.

Guidance:

* Expected revenue for H2FY26 is over INR 20Bn.

* Total revenue for FY26 is expected to exceed INR 32Bn, while FY27 revenue is projected to rise by over 20% YoY, surpassing INR 40Bn.

* PSPPL targets stabalising margin in the range of 8–9% as revenue contribution ramps up across projects, with 8% margin expected in H2FY26E.

* The partnership with the Adani is strategically advantageous, given its planned capex of over INR 2 lakh crore over the next 1.5–2 years. Favouorable contract terms, such as a 10% mobilisation advance and rapid payment cycles, are expected to shorten receivable days and ease working capital requirement.

Orderbook:

* The current orderbook stands at INR 98.3Bn, with Adani Group projects accounting for approximately 56%.

* Order inflow for the quarter was INR 40.1Bn (excluding GST), whicj was largely from the Adani.

* The total expected fresh order inflow for H2FY26 is INR 40Bn and, for FY26, it is anticipated to be INR 110Bn.

Operational Insights:

* The improved revenue performance was driven by stronger project execution, supported by better worksite readiness and increased labour availability from midAugust 2025. Operational efficiency also improved with the conclusion of the monsoon season.

* PSPPL achieved a world record by completing 24,000 cubic meters of concrete in 54 hours for the foundation of the 504th temple in Ahmedabad — recognised by the Golden Book of World Records.

* Most Adani Group projects began mobilisation in Q2FY26, which is expected to drive sustained execution momentum through H2FY26.

* Improvement in execution momentum expected in H2FY26 owing to dry weather and finishing activities.

* Five projects were successfully completed in this the quarter, including work for IIM Ahmedabad, Mundra Solar Manufacturing, Astral Limited, and Mundra Petrochem Limited.

* Work execution at the Gift City project is progressing well as the labour situation improved post monsoon. Two land acquisition components are pending which expected to be finalised by November 2025.

* Work at GMC (horizontal project development) is temporarily paused due to land acquisition issues.

* Final finishing work at the Ahmedabad airport project is underway

* Minor land acquisition delays in two projects are expected to be resolved soon.

Valuation Section

We continue to take a more holistic approach to valuing PSPPL and incorporate a DCF based model (10 year explicit forecast period upto 2035E and terminal growth rate of 2.0%) which yields a TP of INR 720/share. Risks to our rating include large volumes of high margin deal wins from the Adani group, PSPPL demonstrate evidence that they are willing to forego deals from the Adanis for more lucrative outside opportunities.

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