Kotak Securities has given a buy recommendation on Mercator with a target price of Rs 34.

"We recently interacted with the management of Mercator to get an update on the latest developments in the business areas of Mercator. The stock has fallen 52% in the last one year despite efforts of the company to diversify the business of the company as a hedge against the poor performing shipping segment. At present, the company has diversified into mining and has three mines in Indonesia with an estimated reserve of 75 million tonnes," the brokerage said.

It also has a floating and production unit (FPU) and two oil blocks in the Cambay basin in Gujarat in the offshore sector. "We believe the coal and the offshore segment would drive the top line and profitability in FY13E with contribution of coal (mining and trading) increasing from 47 per cent in FY11 to 62 per cent in FY13E," it said.

"We also expect the IPO of Oorja Holding (mining business) to come by FY14E after the business has achieved some scale and would be value accretive. Management indicated that the shipping segment would continue to go through a bad phase atleast for the next 3 to 4 quarters. We believe the fall in stock price, strong performance of the coal and offshore segment and IPO of Oorja holding offers an attractive opportunity for investors to participate in the story which also has the backing of the value of shipping assets," the brokerage said.

"We reiterate buy on the stock with a target price of Rs 34 for the stock. Our target price is based on SOTP value of the different segments: shipping Rs 19, mining Rs 12 and offshore Rs 3. Downside risk to our call includes further deterioration of the shipping market, fall in coal prices and crude price and high leverage," the brokerage said.

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