Dredging Corp's 20% surge on stake sale buzz leads rally in small PSUs
, ET Bureau|
Updated: Nov 03, 2017, 08.36 AM IST
State-run Dredging Corp's standalone revenue for the June quarter rose 10.8 per cent to Rs 157.9 crore and its net profit was less than Rs 4 crore! Yes, the firm where the government decided to sell its entire stake on Wednesday, is hobbled by falling revenue and plunging profits. Its annual performance since 2014 is also nothing to write home about.
But the stock is up 91 per cent so far in 2017 and on Thursday it staged another rally to close at Rs 734.90, up 9.7 per cent. Analysts like AK Prabhakar, head of research at IDBI Capital Markets, believes that the shares are now expensively valued. "It is fully valued. Those holding the stock can take some profits off the table," Prabhakar told ET on Thursday.
The government on Wednesday decided to sell its entire holding in Dredging Corp and this fuelled a rally in shares of smaller PSUs. State Trading Corp closed 7.2 per cent higher at Rs 233.70 after gaining 19.2 per cent in Wednesday's session.
Following the 11.4 per cent surge on Wednesday, MMTC ended up 5.7 per cent at Rs 74.50 on Thursday. Hindustan Copper ended up 9 per cent at Rs 82.70 and Shipping Corporation of India jumped 4.3 per cent to Rs 107.60.
Analysts said stake sale in Dredging Corporation is a positive as it will be privatised but further gain in the stock would depend on the new management and what they want to do with the firm. The company, which is involved in providing dredging services to Indian ports, also stands to benefit from government initiatives, such as 'Sagarmala'.
In the near term however, valuations are expensive. ETIG Database shows that the stock is trading at 278.37 times on a trailing basis.
Deepak Jasani, head of retail research at HDFC Securities, said PSU stocks are rising due to expectation of value unlocking by strategic sales in some companies and expectation of performance improvement in some other companies backed by fund infusion and sales order push by the government."Dredging Corp news has created traders' interest in some other less deserving PSU stocks where retail traders and investors have to be careful of entering," said Jasani.
But the stock is up 91 per cent so far in 2017 and on Thursday it staged another rally to close at Rs 734.90, up 9.7 per cent. Analysts like AK Prabhakar, head of research at IDBI Capital Markets, believes that the shares are now expensively valued. "It is fully valued. Those holding the stock can take some profits off the table," Prabhakar told ET on Thursday.
The government on Wednesday decided to sell its entire holding in Dredging Corp and this fuelled a rally in shares of smaller PSUs. State Trading Corp closed 7.2 per cent higher at Rs 233.70 after gaining 19.2 per cent in Wednesday's session.
Following the 11.4 per cent surge on Wednesday, MMTC ended up 5.7 per cent at Rs 74.50 on Thursday. Hindustan Copper ended up 9 per cent at Rs 82.70 and Shipping Corporation of India jumped 4.3 per cent to Rs 107.60.
Analysts said stake sale in Dredging Corporation is a positive as it will be privatised but further gain in the stock would depend on the new management and what they want to do with the firm. The company, which is involved in providing dredging services to Indian ports, also stands to benefit from government initiatives, such as 'Sagarmala'.
In the near term however, valuations are expensive. ETIG Database shows that the stock is trading at 278.37 times on a trailing basis.
Deepak Jasani, head of retail research at HDFC Securities, said PSU stocks are rising due to expectation of value unlocking by strategic sales in some companies and expectation of performance improvement in some other companies backed by fund infusion and sales order push by the government."Dredging Corp news has created traders' interest in some other less deserving PSU stocks where retail traders and investors have to be careful of entering," said Jasani.
