Mercator Lines attractive in short term: ICICI Direct

Pankaj Pandey, Head of Research, ICICI Direct

You are big on shipping stocks. You are recommending a buy on Mercator Lines stock with a target of 59, why is that?

What we feel is that though we are not very positive for a very long term outlook ,say one or two years, on the entire sector but what we feel is that in the short term we have seen that Baltic Dry Index is taking support at 2500 odd levels and bouncing back from those levels and if you see most of the stocks, they are available quite attractive despite really not very great earning momentum going forward. We feel that there could be a short term uptrend in these stocks since we will see key raw material prices coming up for negotiations which again could be in the range of 25% to 40%. Company like Mercator which has got half of its feet in the tribal side could benefit because of this short term uptrend and we are expecting about 5% price appreciation over the next 7 to 10 days in both the counters GE Shipping and Mercator Lines. On the other side, we are also positive on Ruchi Soya wherein we feel that it could deliver about 10% from current levels. We feel that the company did margins of about off 3% which we expected to improve by another 2% going forward and we expect the company to delivery an EPS of about 8 in FY10 which again should be about 9.6 is what we are expecting in FY11. So in that sense, we are positive on this counter as well.