Dredging Corp of India is a good buy

Dredging is not a commonly used word and hence lets first understand what it means. Ports in coastal areas are essential for transportation, fishing and maritime defence. To ensure continuous availability of the desired depths in the shipping channels of minor and major ports, the process of removal of materials , earth and rubbish from the bottom of the river by means of a shipping machine is called dredging. While capital dredging is a process of removing the virgin soil to create designed depths in water bodies , maintainence dredging on the other hand is a process to remove accumulated material in any port or harbour to design navigable depth for safe entry and exit of shipping vessels. To maintain the coast line beach nourishment is an ideal process of deposition of sediments to replace the erosion taking place. Similarly land reclamation is an artificial process to raise the land level to improve the depth in water bodies.

Dredging Corporation of India is the country’s only public sector enterprise primarily engaged in dredging activity with a whopping 75% market share . It has a fleet of 16 dredgers with a combined dredging capacity of 85 million cubic metres. Government has announced large infrastructure projects centred around coastal development like Sagarmala, Clean Ganga, Jal Marg Vikas and Sethusamudram. Infrastructure transportation is the backbone of any growing economy and the cost of water cargo transportation is a fraction to the cost of road and rail cargo transportation. There is an urgent need in our country to supplement the choked road and rail network with the available 13000 km navigable coast line.  At present India is using only one third of this availability. There is huge unprecedented opportunity in India related to marine inland navigation and national waterways . Being a leader in dredging expertise and execution capabilities , Dredging Corporation is well poised to take full advantage of this opportunity. The government’s proposal to link 111 rivers across the country is an ambitious project and Dredging Corporation could bag large orders from it .While it will be a key execution challenge , large orders can take the company to a higher trajectory phase and exceptional profit margins for the next couple of years. The stock currently quotes at Rs 430 on the Indian bourses and it can be a multi bagger investment opportunity for portfolio investors. The share can easily double or triple in 2-3 years time. Buy for solid gains over long term.