Extensive opportunity in both defence & commercial shipbuilding segments
About the stock: Cochin Shipyard (CSL), incorporated in 1972 as a Government of India company, is one of the leading ship-building & ship-repair yards in India
• For 9MFY25, revenue is up 20.4% YoY to ₹ 3062.3 crore, as ship-repair revenue is up 45.7% YoY while ship-building revenue is up 10.6% YoY. FY24 revenue ₹ 3830.5 (+62% from FY23)
Investment Rationale:
• Strong capabilities in ship-building & ship repair; execution pick-up of strong order-backlog to drive growth: With advanced state-of-the-art infrastructure (capacity of up-to 110000 DWT in ship-building and up-to 125000 DWT in ship-repair), CSL is adept at executing diversified projects in both these segments. With commissioning of new dry dock facility and International Ship Repair Facility (ISRF), company’s capabilities have increased significantly. During 9MFY25, execution in ship-building segment (66% of total) has been moderated (revenue grew ~11% YoY) while the execution in ship-repair segment remained strong (revenue grew ~46% YoY). With strong order backlog (estimated at ~ ₹ 22000 crore; ~5x TTM revenue) and pick-up in execution, we expect revenue growth to remain healthy in the coming period
• Order inflows opportunity remains robust: The company is well positioned to benefit from significant order inflows in both defence and commercial shipbuilding, supported by a strong pipeline. The Indian Navy’s plans to acquire warships, including an estimated ₹ 40,000 crore aircraft carrier, present major opportunity for CSL. Additionally, we believe that the govt’s strong focus on improving India’s maritime infrastructure will create significant opportunities in commercial ship-building across cargo and passenger segments. Govt aspires to position India among the world’s top five shipbuilding nations (currently India’s position stands at 22 with less than 1% share in global ship-building market). Furthermore, talks have begun with leading shipbuilders from South Korea and Japan to promote collaboration and enhance production capabilities in India. Europe also plans to replace its 2,500 vessels with green vessels, creating substantial demand for exports. The ship repair sector also shows promise, bolstered by the company’s capabilities and government support. Recently, the company signed a MoU with AP Moller – Maersk to enhance ship maintenance, explore repair, construction opportunities
Rating and Target Price
• We expect CSL to witness significant YoY growth in revenues & profitability over FY24-27E, led by execution pick-up in both the segments and increasing share of margin accretive ship-repair segment. We estimate revenue & PAT CAGR of ~21% & ~18% over FY24-27E
• Valuations look attractive considering the multiple growth drivers. We value CSL at ₹ 1700 per share (based on 35x P/E on FY27E EPS)
IDirect_CochinShipyard_CoUpdate_Mar25
Leave a Reply