Stock Review: Dolphin Offshore

This stock has been correcting, if you see in last six months the stock has corrected from Rs 350 to Rs 120. The day before it made its 52 week low at Rs 120. This has been on our radar that the stock now looks very good.

The main reason for the fall in the share price has been the poor working for FY11. This is because in FY10 company posted an EPS of Rs 40 while in FY11 it was close to at about Rs 10.

Obviously the fall in the share price was expected. But beyond a point when you see such a steep fall, you see is the value buying coming back in these kinds of stocks. Yesterday it could be the act of the value buying, because going forward, the company has two-three notes to their accounts which they have presented.

One is in respect of the non-provisionally to the extent of Rs 40-45 crore in respect to the delay damages. But, on the other hand they have got Rs 33 crore billing for the extra work carried out as well. Apart from that, there is an equivalent amount of about Rs 40-45 crore extra billing which needs to be carried out for the work having implemented by them.

On a net basis if you see the extraordinary on account of the delays in execution as well as the extra work gets nullified, get set-off. Going forward, FY12 should be a normal year for the company. I am not saying that they will bounce back to an EPS of Rs 40 because if that happens share can easily move to Rs 300 plus. But, considering all the normal factors  the list of clientele they have, they should be able to post an EPS of Rs 20 plus for FY12.

Because gradually they may ramp up their EPS, their bottom-line in next couple of years back to about 30 plus but at least for FY12 I am expecting it to be about 20. If you take that into consideration share available at a PE multiple of 7 makes the stock a good buy. I am expecting a price of close to about Rs 200 in the next six months or so.