Stock of this shipbuilding company has zoomed over 100% in 5 months

Shares of Cochin Shipyard (CSL) hit a new high on Monday after the shipbuilder signed Master Shipyard Repair Agreement (MSRA) with the United States Navy.

Shares of Cochin Shipyard (CSL) hit a new high of Rs 1,154, surging 7 per cent on the BSE after the company signed the Master Shipyard Repair Agreement (MSRA) with the United States Navy.

CSL in an exchange filing said the MSRA is a non-financial agreement and is effective from April 05, 2024. This will facilitate repair of US Naval vessels under Military Sealift Command in CSL.

Meanwhile, since March 14, in the past 16 trading days, the stock price of CSL has appreciated by 58 per cent. In past five months, it has more than doubled or zoomed 120 per cent from the level of Rs 523.60. The company is engaged in two major activities viz., shipbuilding and repair of ships/offshore rigs etc.

On January 10, the stock turned ex-date for the sub division of equity shares in the ratio of 2:1 i.e. from face value of Rs 10 to Rs 2 to make them more affordable for retail investors and boost their shareholding.

In the third quarter of FY'24 i.e. December quarter (Q3FY24), CSL witnessed a significant 62 per cent year-on-year (YoY) increase in turnover at Rs 1,021.45 crore. The profit after tax more than doubled to Rs 248 crore from Rs 118 crore in Q3FY23.

Analysts expect CSL to witness significant YoY growth in revenues & profitability over FY24-26E, led by execution pick-up in both the segments and increasing share of margin accretive ship-repair segment.

With an order backlog of around Rs 22,300 crore as of Dec-23 (7x TTM revenues) and pick-up in execution, gives strong revenue growth visibility. Large-scale contracts for the Indian Navy (like anti-submarine corvettes, next-gen missile vessels, post commission works of Indigenous Aircraft Carrier) are expected to witness meaningful execution over FY25- 26E. Moreover, execution of commercial vessel contracts (20 per cent of orderbook) is also expected to pick-up considerably over FY24-26E, analysts at ICICI Securities said.

Order pipeline remains healthy in defence and commercial ship-building and ship-repair segments including exports. About Rs 9,000 crore worth of ship-building contracts are in pipeline where tenders are expected to be floated in the medium term. Apart from these, Rs 84,000 crore worth of contracts are in “Request for Proposal” (RFP) stage as per the management.

India Ratings and Research (Ind-Ra) expects CSL’s revenue from operations to grow steadily in the near term, in the light of the company’s healthy order book and strong capabilities to build and repair all types of vessels.

CSL has built and repaired some of the largest ships in India, including aircraft carriers, cargo vessels and technology demonstration vessels. Apart from repairing different types of ships, the company has secured orders for next generation missile vessels and export orders of service operation vessels.

CSL has also bagged an international export order for constructing two commissioning service operation vessels, from a European client, with an option to build four more within a year. These vessels are intended for the services of offshore wind farm installations and their commissioning and maintenance. These specialised vessels are being contracted for the first time for an Indian ship maker. CSL has capability to undertake complex and sophisticated repair of all types of vessels including oil rigs, naval and coast guard vessels, Ind-Ra said in rationale.