Antique Stock Broking has upped its target price for Cochin Shipyard by 11 per cent. Yet, it suggested a ‘Hold’ on the defence PSU stock, thanks to muted near-term order pipeline due to deferral of IAC-II.
Cochin Shipyard’s estimated order book of Rs 22,500 crore provides a book-to-bill ratio of almost 5 timers, which is good enough to drive a 14 per cent CAGR in revenue growth over FY25-28, Antique Stock Broking said.
“Though it is the largest shipyard in terms of capacity (and the only one to have prior experience in building aircraft carriers), a prospective timeline for a second aircraft carrier remains uncertain. Nevertheless, the ship repair business holds immense opportunity for the company and hence despite our target price indicating a downside from current levels,” the brokerage said.
The defence PSU stock has risen 28 per cent in the past one week against Mazagon Dock Shipbuilders’ 13 per cent rise and Garden Reach Shipbuilders & Engineers’ 29 per cent surge.
For the March quarter, Cochin Shipyard’s standalone revenue beat Antique’s estimates by 22 per cent. The sales growth stood at 35 per cent YoY and 54 per cent QoQ, aided by strong execution.
That said the defence PSU clocked an Ebitda margin of 15.3 per cent, down 790 basis points on YoY basis. As a result, standalone Ebitda missed Antique’s estimates by 17 per cent.
“Despite this, reported PAT at Rs 280 crore came in 11 per cent higher than our estimate, mainly attributed to 96 per cent YoY growth in other income. We raise our estimates (EPS for FY26/ 27E by 15 per cent each) and maintain HOLD rating on the stock with a revised target of Rs 1,640 (prior target of Rs 1,481) at a core target P/E multiple of 45 times FY27,” Antique said.
The brokerage aid India’s share of global ship repair is less than 1 per cent, but the country’s location is favorable with 7-9 per cent of the global trade passing within 300 NM of the coastline.
The global ship repair market is approximately $12 billion and is projected to reach $40 billion by 2030. Additionally, India may offer repair services to allies: the US Navy’s 5th and 7th fleet in the Indian Ocean & Arabian Sea.
Cochin Shipyard has signed a Master Shipyard Repairs Agreement with the US Navy, which enables US ships to dock and undergo maintenance refits.
“The investment in a dedicated ship repair facility underscores the commitment of the company in building this revenue segment,” Antique said.
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