ICICI Direct is bullish on Cochin Shipyard has recommended buy rating on the stock with a target price of Rs 410 in its research report dated February 14, 2019.
ICICI Direct's research report on Cochin Shipyard
Cochin Shipyard (CSL) reported strong Q3FY19 numbers despite higher contribution from the shipbuilding segment. This is due to strong margins posted in both segments of the business. Shipbuilding and ship repair segment reported EBIT margins of 19.4% (normal margins 8-15%) and 39.8% (normal margins 25-35%) respectively. Shipbuilding and ship repair segment contributed 77.1% and 22.9% to the topline, respectively Revenue rose strong 16.5% YoY to Rs 716.4 crore. Shipbuilding revenues grew 35.4% YoY while ship repair revenues de-grew 20.7% YoY. We expected revenue of Rs 671.5 crore for the quarter EBITDA margins came in at 22.1% vs. 22.3% YoY. Gross margins declined 190 bps YoY due to higher contribution from the shipbuilding segment. Employee expenses grew only 6.9% YoY. Absolute EBITDA grew 15.5%YoY to Rs 158.5 crore Other income declined 2.5% YoY to Rs 49.7 crore. Accordingly, PAT grew 14% YoY to Rs 147.6 crore.
Thus, we estimate revenue, EBITDA and PAT CAGR of 20.6%, 16.2% and 8.8%, respectively, in FY18-21E. We value CSL at 11x FY21E earnings to arrive at target price of Rs 410/share. We maintain BUY recommendation on the company.
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