Cochin Shipyard shares fall 5%: Why Antique cut price target for this defence stock

Antique Stock Broking has cut its target price on Cochin Shipyard Ltd to Rs 1,407 from Rs 1,671, citing weak execution and elevated valuations, while retaining its 'Hold' rating. The brokerage said the company reported weak operational performance in the September quarter, with a sharp miss at the Ebitda and profit levels, even as revenue growth was broadly in line with estimates.

The Shipbuilding division's weak profitability, resulting in an EBIT loss, weighed on overall margins. While the healthy order book provides medium-term revenue visibility, near-term execution and profitability remain key monitorables, Antique said.

The stock fell 5.04 per cent to hit a low of Rs 1,224 apiece on Wednesday.

"We remain constructive on the shipbuilding sector, supported by a robust naval acquisition pipeline and an expanding commercial shipbuilding opportunity. However, CSL’s valuations at 32 times/27 times FY28E/FY29E earnings remain at a premium to listed defence shipbuilding peers, limiting near-term upside," Antique said.

Following the weak H1FY27 performance, Antique cut its earnings estimates by 13.7 per cent for FY27, 12.1 per cent for FY28 and 12.5 per cent for FY29.

"Accordingly, we maintain HOLD with a revised target price of Rs 1,407 (earlier Rs 1,671), based on 40 times core 1HFY29 EPS of Rs 30 per share (and adding cash to arrive at the target price)," it said.

Cochin Shipyard's consolidated revenue rose 11.7 per cent year-on-year (YoY), but its Ebitda margin fell 250 basis points (bps) YoY to 4.1 per cent, sharply below Antique's estimate. The margin miss was mainly attributed to the Shipbuilding division, which reported muted revenue growth of 3 per cent YoY. The Ship Repair division performed well, with revenue growth of 30 per cent YoY and a healthy EBIT margin of 31 per cent. However, weak performance in the Shipbuilding division dragged Ebitda down 31 per cent YoY. Profit after tax (PAT) declined even more sharply, falling 50 per cent YoY and missing Antique's estimates.

Cochin Shipyard's current order book is estimated at Rs 21,900 crore. Key orders include ASW Corvettes, NG-Missile Vessels and LNG-powered Container Vessels. Of these, the ASW Corvettes are at an advanced stage of commissioning, with delivery of all remaining vessels expected by the first half of FY29.

"We expect NGMV construction to gain momentum in FY28-30 and drive medium-term revenue growth. CSL is L-1 in the Navy’s Next Generation Survey Vessel programme (~Rs 5,000 crore), which should support order book expansion," Antique said.