Kotak Securities is bullish on Cochin Shipyard has recommended buy rating on the stock with a target price of Rs 740 in its research report dated October 11, 2017.
Kotak Securities' research report on Cochin Shipyard
Cochin Shipyard (COSH) is a public sector shipyard with an order book of ~Rs.83 bn providing revenue visibility of 48 months. The current order-book comprises orders from the commercial segment, navy, coast guard and ship-repair segment. We estimate the company to continue to receive orders across segments with the order book growing at 20% CAGR with orders primarily coming from the Navy and Coast Guard. The company is also ramping up its capacity with a third dry-dock and an international ship-repair center. We are positive on the company for 1) Recurring orders from Navy and Coast guard and 2) Improvement in the prospects of commercial shipbuilding segment. High margin ship-repairs business is value additive for the company. Expect prospects to improve for the company going forward especially with the Make in India initiative of GOI. Estimate 13% earnings CAGR over FY17 to FY20E with improvement in return ratios post full utilization of IPO money.
Value the stock at 25x FY19E PE which is at discount to the mean one year forward PE of major international ship building companies in the current environment. Initiate coverage on the stock with a BUY rating and a TP of Rs 740.
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