Cochin Shipyard share confirms breakout, 11% upside likely, says Anand Rathi

Defence stock Cochin Shipyard Ltd is likely test the Rs 1,660 level soon in the short term, as the scrip has confirmed a breakout above Rs 1,500 level, said Anand Rathi in a note.  The brokerage, which sees 11 per cent upside on the counter, said the scrip has managed to confirm a breakout above Rs 1,500 mark after a long consolidation. The price structure, it said, resembles an Inverse Head and Shoulder pattern which is bullish in nature.

Besides, this price action is supported with volumes and positive placement of momentum oscillators, the brokerage said while suggesting a buy on the stock.

Anand Rathi said one can buy the stock near Rs 1,500 with a stop loss of Rs 1,420 for an upside target of Rs 1,660. On Monday, the scrip hit a high of Rs 1,566.25 and was later trading 2.81 per cent higher at Rs 1,491. The defence stock has gained 36 per cent in the past one year against 6 per cent rise in the BSE Sensex.

In a note last week, Nuvama Institutional Equities said Indian defence stocks across the spectrum have re-rated explosively over the past two–three year -- nalthough underperformed Nifty over last nine months. 
The ammo came from the government/defence ministry's indigenisation drive and exports-focused growth.

"This showed up in robust ordering momentum (across value chain) and better execution
(not yet broad-based). We believe India’s defence growth story is structurally transformative, notwithstanding some snags (execution delays, supply chain logjams, stock price corrections) along the way," Nuvama said.

For the March quarter, Kotak Institutional Equities expects Cochin Shipyard to report 38.9 per cent YoY growth in revenue at Rs 1,701 crore, driven by the execution of the ASW Corvette and NGMV  projects, and the ship repair segment. It expects 21.8 per cent Ebitda margin for the quarter, down 159 basis points, driven by a higher contribution from ship repair. Profit after tax is seen at Rs 273.60 crore, up 3.4 per cent YoY.