Cochin Shipyard shares slip 4% on weak Q1 earnings, fresh price targets and more

Cochin Shipyard shares slipped 4% in early deals on Monday after the ship building and allied services firm reported its Q1 earnings. Cochin Shipyard stock fell 3.88% to Rs 1436.95 against the previous close of Rs 1495. Market cap of the firm fell to Rs 38,725 crore. Cochin Shipyard has a one-year beta of 1.36, indicating very high volatility during the period. Cochin Shipyard shares are trading lower than the 5 day, 10 day, 100 day, 150 day, 200 day but higher than the 20 day, 30 day  and 50 day moving averages, indicating bearishness in the defence stock.

Consolidated net profit fell 27.7% year on year to Rs 135.8 crore in Q1 compared with Rs 187.9 crore in the corresponding quarter last year. Revenue from operations fell 6.9% to Rs 910 crore in Q1 from Rs 977 crore a year earlier.

On the operating front, EBITDA fell 32.5% to Rs 157.6 crore against Rs 233.6 crore in the year-ago period. EBITDA margin contracted to 17.33% from 23.91%.

Kotak Equities has a Sell rating on the stock  with a price target of Rs 860 per share. The target amounts to a potential downside of roughly 42% from its previous close of Rs 1,492.

Kotak Equities said Cochin Shipyard’s latest results were around 10% ahead of its estimates, supported by stronger execution, while margins remained broadly in line with expectations.

Despite the better operational performance, profitability declined 28% year-on-year and 37% sequentially. Kotak attributed the decline to the normalisation of margins after the company completed high-margin, one-off ship repair orders related to INS Vikrant and INS Vikramaditya.

Looking ahead, Kotak believes developments around the company’s proposed partnerships with HD KSOE (Hyundai), Maersk and Drydocks World will be important growth triggers. The brokerage also highlighted the recently announced expansion of Cochin Shipyard’s ship repair facility at Vadinar as a potential catalyst.

At the broader industry level, Kotak expects the government’s ?70,000-crore shipbuilding package to provide a structural boost to India’s shipbuilding ecosystem and support long-term sector growth.

However, despite the positive growth outlook and recent execution momentum, Kotak maintained its ‘Sell’ rating on Cochin Shipyard with a price target of Rs 860.

Muthuselvaraj M, Research Analyst at Mirae Asset Sharekhan said, "Cochin Shipyard has recently witnessed a base formation breakout on the daily time frame, suggesting a potential reversal toward the Rs 1,840 hurdle in the medium term. The stock remains resilient above its 50 and 100-day EMAs, indicating positive momentum for the short to medium term. We expect the rally to continue toward the Rs 1,650-1,740 range, with key support established at Rs 1,350."

Cochin Shipyard Limited is engaged in the shipbuilding and ship repair business. The company is engaged in the construction of vessels and repairs and refits of all types of vessels including upgradation of ships periodical layup repairs and life extension of ships.