Subscribe to Cochin Shipyard: ICICI Direct
ICICI Direct has come out with its report on Cochin Shipyard. The research firm has recommended to “Subscribe ” the IPO in its research report as on July 25, 2017
Cochin Shipyard (CSL) is the largest public sector shipyard in India in
terms of dock capacity. The company cater to clients engaged in the
defence sector in India and clients engaged in the commercial sector
worldwide. In addition to shipbuilding and ship repair, CSL also offers
marine engineering training.
As of January 31, 2017, CSL has two docks – ‘ship repair dock’ used for
ship repair and ‘shipbuilding dock’ used for shipbuilding. CSL’s ship repair dock is one of the largest in India and enables it to accommodate vessels with a maximum capacity of 125,000 DWT. The company’s shipbuilding dock can accommodate vessels with a maximum capacity of 110,000 DWT. The company is also in the process of constructing a new dock, a ‘stepped’ dry dockRecommend SUBSCRIBE
At the upper band of | 432, the stock is available at 18.2x FY17 EPS of
| 23.7. We have a SUBSCRIBE recommendation on the offering based on
robust order book (~| 3000 crore), strong order inflow visibility, best-inclass execution capabilities and leverage free balance sheet.Valuations
Despite turbulent times in the global shipbuilding history, CSL has delivered topline and bottomline growth of 11.1% and 18.7% CAGR, respectively, in FY07-17. CSL has a strong balance sheet with debt at | 123 crore and cash at | 1600 crore. With moderate capital expenditure of | 2800 crore over the next three years (FY18-21E) and superior return profile (average RoEs, RoCEs of 15.5%, 16.5%, respectively, in FY12-17), we believe CSL is a quality play and is on a strong footing.
At the upper band of | 432, the stock is available at 18.2x FY17 EPS of | 23.7. We have a SUBSCRIBE recommendation on the offering based on robust order book (~| 3000 crore), strong order inflow visibility, best-in-class execution capabilities and leverage free balance sheet.
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