Cochin Shipyard shares up on stock split, Q2 results; target Rs 1,145, says Antique

Shares of Cochin Shipyard Ltd surged 3 per cent in Wednesday's trade to take its winning run to the second straight session after the company reported a strong set of numbers and announce stock split in 2:1 ratio, in addition to the announcement of Rs 8 per share interim dividend.

Antique Stock Broking, which has a 'Hold' rating on the stock, said Cochin Shipyard’s execution is normalising as Rs 9,800 crore of the NGMV order moves into execution and critical supply chain issues worth Rs 5,900 crore ASW order gets ironed out. Ship building execution stood at Rs 700 crore, up 33 oer cent YoY. Ship repairs stood at Rs 250 crore, up 62 per cent YoY.

"The spotlight, as usual, is on IAC-2, or INS Vishal. The board has recommended a 2:1 stock split, subject to shareholder approval, and an interim dividend of Rs 8/share. We retain HOLD rating at a target price of Rs 1,145 (29 times 1HFY26E annualised)," it said.

The stock rose 3.05 per cent to hit a high of Rs 1,073.80 on BSE. Antique Stock Broking's share price target suggests a 6.6 per cent potential upside over this price.

With an Rs 21,000 crore opening order backlog of FY24, Cochin Shipyard ideally should have an execution schedule of over Rs 4,000 crore-plus in revenue till FY25E.

The key surprise for FY25E execution, however, lies in the ASW Corvette orders, sustainable ship repairs, and gradual ramp-up in the NGMV order, Antique Stock Broking aid.

Upside risks for Cochin Shipyard includes additional big ticket order wins like IAC-2, or stronger inroads into dredging and allied verticals. Downside risks, Antique Stock broking said, included delay in executing ASW Corvette or NGMV orders.

"At the beginning of FY24, of the Rs 17,500 crore of defence works in hand, Cochin Shipyard reported Rs 1,900 crore of IAC-1 works pending. As the execution concludes, a bout of higher margin will aid in. Besides, 26 per cent of the revenue flows in from ship repair, helps Cochin insulate from other shipyards. Having said that, R 85 crore ship repair revenue booked in IAC-1 seems to be low margins— as the ship repair segment witnessed 381 bps EBIT margin erosion," Antique Stock Broking said. bn achieved till 1HFY24.

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