Geojit Financial Services research report on Cochin Shipyard
Cochin Shipyard Ltd. (CSL) is the largest public-sector shipyard in India and derives major revenue from the Navy. CSL core capabilities include Naval vessel construction, coast guard projects, commercial shipbuilding, and vessel repair services. In Q2FY25, revenue grew by 15% YoY led by better execution in shipbuilding (16% YoY )and ship repair (12%) business. However, EBITDA was flat on account of higher input costs and dip in shipbuilding margins leading to 260bps YoY decline in EBITDA margin to 18%. Consequently, reported PAT was flat YoY. Order backlog is at Rs.22,000cr, 5x FY25E projected sales provides strong visibility in next couple of years. While order pipeline remains healthy at Rs.7,820cr. With completion of capacity expansion at dry dock and its international ship repair will enable it construct and repair larger vessels. Further, CSL is actively pursuing opportunities in green energy platforms and hybrid ship, which is now a key focus area.
Outlook
CSL witnessed a 61% correction in valuation and is currently trading at 1 Yr Fwd P/E of 30x. Considering, sharp moderation in valuation and healthy earnings, we value CSL at a P/E multiple of 37x on FY26E, assigning an BUY rating on the stock with a target price of Rs.1,557.
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