LKP Research's research report on Cochin Shipyard
Cochin Shipyard Ltd (CSL) reported a healthy set of numbers in Q4 with topline growing by 3.6% yoy, though on a qoq basis they fell by 9%. The material costs saw a contraction in Q4 as they stood at 48.3%. Subcontracting costs dropped by 18.4% yoy in the quarter. EBITDA margins saw a solid surge at 20% v/s 14% yoy as the company reported strong ship repair margins at 27% on a strong execution and delivery in this business. Other income fell to Rs450 mn over Rs643 mn yoy. PBT grew by 14.8% yoy to Rs1.8 bn, while reporting strong margins at 22.6%. PAT came at Rs1.4 bn , which has grown by 42.5% yoy, while margins came at 17%. The company delivered a 1000 MT Cargo vessel for A&N administration. The company also delivered 8 RoRo vessels (2 are remaining) and one fishing vessel to TN fishermen. Impact of COVID was very well felt in the quarter for last seven days and in Q1, as a result of which the delivery of IAC will be further delayed to FY 22 from the planned date of Feb 2021. The company has announced Rs15/share of final dividend, taking FY20 dividend yield to 6.2% at ~30% payout.
However, with highest margins in the industry, competitive moat in the ship repair business, robust employee efficiency ratios, comfortable financial leverage we still like the company and maintain a BUY rating though with a slightly reduced target price of Rs350.