Company is into marine dredging and allied services like ship building, marine security, and patrol boats etc.
Technocratic promoter with good experience working in giant firms like Adani.
Dredging which forms 95% of the business is low competition and high margin.
Management has clearly stated their focus on only taking up contracts where they can maintain EBITDA of 30-40%.
India’s port infrastructure has huge room for growth and improvement. The government is getting aggressive about exporting made-in-India goods, hence all allied sectors like ship building, ports, marine dredging, fishery, logistics etc are bound to grow.
Company has scaled up rapidly while keeping control of debt. They have also guided for capex execution only upon receipt of contracts.
They want to do minimum required capex and hence are following a strategy of JV with players in adjacent sectors to take advantage of synergies and jointly bid for larger and different types of contracts.
Successfully executing Myanmar’s Sittwe port dredging works.
Company has also stated their goal of diversifying into sand dredging. This too is high margin and holds huge potential for growth as the world is running out of sand.
High promoter holding.
Ace investor Ashish Kacholia holds around 3% stake.
Risks:
Stock is fair to slightly overvalued at trailing PE of 30. At this price, there could be a short-term correction of 15-20%.
If allied services % in revenue increases, then margins will go down so need to track this.
It is not exactly clear how they will compete against domestic giants like Adani who own ports and have also taken up some dredging projects.
Size of operations is small.
The board of directors is filled with close family members. While this shows skin in the game which is good, we also need to be track if they can professionally grow the company in a manner which benefits minority shareholders.
Success depends on timely tendering and winnability of Government contracts.
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