Cochin Shipyard shares down 36% from 52-week high; are they short-term buying opportunity?

Shares of Cochin Shipyard Ltd have fallen 36 per cent from their 52-week high level. While the stock has risen in three straight sessions, analysts are mixed on whether the stock has bottomed out. Cochin Shipyard has been on a corrective mode since almost the Rs 3,000-mark and recently went towards Rs 1,800 level, Anand Rathi said. The PSU stock, which was in the red for eight consecutive weeks, is now seeing some reversal of late, it said. 

"There is a reversal candlestick pattern too on the daily chart which indicates possibility of pullback. Thus, we advise traders to go long in the stock in the range of Rs 1,950–Rs 1,930 with a stop loss of Rs 1,790,' it said.

The brokerage sees the stock testing Rs 2,165 level in the next 30-90 days. The scrip hit a 52-week high of Rs 2,977.10 on July 8. It was trading at Rs 1,940.35 on Thursday, up 0.58 per cent.

Laxmikant Shukla, Technical Research Analyst at YES Securities said he sees a rebound in Cochin Shipyard as a temporary relief rally rather than a sign of a sustained recovery. 

"The stock continues to exhibit a strong bearish trend, currently trading below its 20,50 and 100 SMAs. This downtrend is further confirmed by momentum indicators and oscillators, which highlight the prevailing negative sentiment. Considering these factors, we recommend avoiding this stock for the next few weeks," he said.

Antique Stock Broking noted that a shipyards' revenue cycle can be envisaged as a S-curve, in which Phase 1 (hull building) may take long but has a Value of Production (VoP) of 7-8 per cent of the total value of a ship. The phase 2 (engine, propulsion system) and phase 3 (weapon systems, electronics, communication systems) take much lesser time but comprise of the major chunk of VoP.  Lastly, Phase 4 (systems integration, sea trials, and commissioning) is again time-consuming but has lower incremental VoP. 

"This explains the volatility in quarterly topline (typical of all ship builders). There are only six large shipyards in the country and with indigenization initiatives, additional focus on Navy's capital expenditure, and government impetus, the medium-term outlook for all Indian shipyards continues to remain positive. We maintain HOLD rating on Cochin Shipyard with a target price of Rs 1,622 at a target 1HFY27 P/E multiple of 45 times," Antique Stock Broking said.

Cochin Shipyard is in news after the Defence Acquisition Council (DAC) recently approved capital acquisition proposals worth Rs 1.45 lakh crore. Nomura India believes the Indian Coast Guard is expected to acquire six NGOPVs. In May 2024, the Ministry of Defence signed a contract with GRSE and Goa Shipyard for 11 NGOPVs valued at Rs 9,780 crore, implying a cost of Rs 900 crore per ship.  The Indian Coast Guard is planning to acquire 18 NGFPVs for a contract value of Rs 4,000 crore and estimated order value is Rs 9,500-10,000 crore. Nomura India said Cochin Shipyard will be among the potential bidders.