This PSU stock has zoomed 104% in 6 months; hits over 16-year high

Dredging Corporation of India hit an over 16-year high of Rs 1,130.55 as they were locked in the 10 per cent upper circuit on Wednesday

Shares of Dredging Corporation of India (DCI) hit an over 16-year high of Rs 1,130.55 as they were locked in the 10-per cent upper circuit on the BSE on Wednesday at 09:26 AM. This comes after the company won a five-year contract worth Rs 2,015.88 crore from Syama Prasad Mookerjee Port Authority (SMPA) for maintenance dredging works in the Hooghly Estuary.

Maintenance dredging is crucial for ensuring the navigability of the shipping channel, thereby facilitating smooth and efficient maritime operations in the region.

The Hooghly Estuary is a vital waterway for maritime trade, and maintaining its depth is essential for the safe passage of vessels to and from the Haldia Dock, DCI said in an exchange filing.

On the bourses, the hit its highest level since January 2008. It had hit a record high of Rs 1,356.10 on November 15, 2007. In the past one week, the stock has outperformed the market by surging 35 per cent as compared to 6.6 per cent rise in the BSE Sensex. In the past six months, the market price of the company has more-than-doubled, zooming 104 per cent, as against 10 per cent rally in the benchmark index.

Meanwhile, the company’s earnings before interest, taxes, depreciation & amortization (Ebitda) for the financial year 2023-24 jumped 81.36 per cent to Rs 224.40 crore in comparison to the previous financial year 2022-23.

DCI said the company is committed to maintaining this upward trend and continue to show improvement in the performance which aims at highever-ever turnover of Rs 1,840 crore for the upcoming financial year 2024-25.

DCI carries out dredging activities including capital dredging, maintenance dredging as well as beach nourishment, land reclamation for Indian ports and Navy. The consortium of four port trusts Jawaharlal Nehru Port Trust, Deendayal, Port Trust, Paradip Port Trust and Visakhapatnam Port Trust currently holds a 73.47 per cent shareholding in the company, with the remaining being held by the public.

India Ratings and Research (Ind-Ra) has revised the outlook on DCI to 'Positive' from 'Negative' while affirming the Long-Term Issuer Rating at IND BBB+.

The Positive Outlook reflects Ind-Ra's expectation of a substantial improvement in the operating profitability in FY25, supported by a healthy order book and DCl's dominant position in maintenance dredging in India. The improvement in its operating profitability would aid in enhancing DCl's liquidity, which was impacted by elongated receivable days and payout towards the crystallisation of its contingent liabilities.

The rating would be upgraded given the visibility on an execution of outstanding order book, an improvement in the working capital cycle, a resolution of the auditor's observation in FY24 annual results and the sustained operating profitability, Ind-Ra said in rationale on April 30, 2024.

The management expects incremental orders of around Rs 2,750 crore, which could lead to a strong revenue growth in the medium term. Given that the top five customer ports contributed around 80 per cent to the current order book and the majority of the contracts have been awarded on a tender basis, a non-renewal of contracts with any of the ports could materially impact the business profile of the company, the rating agency said.