DREDGING CORPORATION OF INDIA LTD - BUY

Dredging Corporation of India Limited, or DCI, is engaged in the business of dredging which involves maintenance dredging, capital dredging, beach nourishment, land reclamation, shallow water dredging, Project Management consultancy and Marine construction. The company is a Mini Ratna category- I PSU with its head office at Visakhapatnam. The current market price of the company spiked up today in morning trade as government stake sale is speculated in the market. The company would definitely benefit from government selling its majority stake and DCI moving to the private sector (in-case of a majority stake sale).

The current Profit After Tax for the December quarter stood at Rs. 140 Mn against Net Loss of Rs. 196 Mn same period previous year. Income from Operations was reported at Rs. 1519 Mn in the current quarter compared to Rs. 1614 Mn corresponding quarter previous year. Though Income from Operations have declined 6% YOY, the company has reduced its operating cost 25% and finance cost by 5% YOY. It would be a win-win situation for both the government & the company as witnessed by the 10% intraday rise in the stock price. The government with stake of about 73% may get a sizeable chunk of its disinvestment target and DCI would benefit from privatization. Irrespective of disinvestment by the government, the stock is attractive for long term investment as DCI is the leader in the Dredging industry in India and would benefit from the government initiatives being undertaken with respect to various projects for inland waterways and increase in merchandise trade. We recommend BUY for the stock with a target price of Rs. 550 for medium & long term. 

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