Cochin Shipyard shares tumble 7%: Weak Q2 earnings overshadow Rs 500 crore MoD order

Shares of Cochin Shipyard Ltd plunged 6.90 per cent to settle at Rs 1,200 on Wednesday, despite the defence PSU securing an order worth around Rs 500 crore from the Ministry of Defence (MoD). The contract is for the normal refit cum re-powering of an Indian Naval vessel and has an estimated execution period of around two years, the company stated.

The decline in the stock came amid concerns over the company's September quarter (Q2 FY27) performance, which saw a sharp miss at the EBITDA and profit levels.

Cochin Shipyard's EBITDA margin declined 250 basis points (bps) year-on-year (YoY) to 4.1 per cent, significantly below Antique Stock Broking's estimates. The margin miss was primarily attributed to the Shipbuilding division, which reported muted revenue growth of 3 per cent YoY.

The Ship Repair division, however, performed relatively well, with revenue rising 30 per cent YoY and the segment reporting a healthy EBIT margin of 31 per cent, Antique noted.

The weak performance in the Shipbuilding division dragged the company's EBITDA down 31 per cent YoY. Profit after tax (PAT) declined 50 per cent YoY, also missing the brokerage's estimates.

Following the results, Antique Stock Broking cut its target price on Cochin Shipyard to Rs 1,407 from Rs 1,671, citing weak execution and elevated valuations. The brokerage retained its 'Hold' rating on the stock.

Choice Institutional Equities, meanwhile, maintained a positive view on the company's medium-term prospects.

"While near-term performance may remain volatile due to uneven project execution and pressure on shipbuilding margins, we believe Cochin Shipyard is well-positioned for medium-term growth," Choice said.

It added, "Following the recent correction in the stock, we upgrade our rating to 'BUY' (earlier 'ADD'). Improvement in shipbuilding execution and profitability remains a key monitorable."

Choice has assigned a target price of Rs 1,565 to Cochin Shipyard.