Cochin Shipyard (COCSHI)

CMP: ₹1119 Target: ₹1340 (20%) Target Period: 6-12 months BUY (HIGH CONVICTION
November 28, 2023 IDEA)
Execution pick-up, strong order backlog to aid recovery…
About the stock: Cochin Shipyard (CSL), incorporated in 1972 as a Government of
India company, is one of the leading ship-building & ship-repair yard in India

Shubh Nivesh
• Company has built and delivered 180 vessels as of Mar-23 including large,
medium & small vessels, offshore support vessels and defence vessels Particulars
• During FY23, ship-building segment contributed ~74% to total revenues of Particular Amount
₹ 2364.6 crore while ship-repair segment contributed balance ~26% Market Capitalization ₹ 14719 Crore
• Order backlog stands at ~₹ 22000 crore as of Sept-2023, including ~₹ 700 Total Debt (FY23) ₹ 132.9 Crore
crore worth of contracts in ship-repair segment Cash & Inv (FY23) ₹ 4758 crore
EV (FY23) ₹ 10094 Crore
Investment Rationale: 52 week H/L 1258 / 410
• Execution pick-up of strong order-backlog: With advanced state-of-the- Equity capital ₹ 131.5 Crore
art infrastructure, CSL is adept with execution of diversified projects in both Face value ₹ 10
ship-building and ship-repair segments. Order backlog of ~₹ 22000 crore Shareholding pattern
as of Sept-23 (8.4x TTM revenues) with pick-up in execution, provides Dec-22 Mar-23 Jun-23 Sep-23
strong revenue growth visibility in the coming years. Capex in new dry-dock Promoter 72.9 72.9 72.9 72.9
and ISRF (International Ship Repair Facility) projects to be completed by
FII 6.9 6.3 5.7 5.8
Q1FY25, would further expand manufacturing capacities. Large scale
DII 3.9 3.8 3.2 2.2
contracts for India Navy like ASW-SCW corvettes (balance order value of ₹
Others 16.4 17.1 18.2 19.1
5542 crore), Next Gen Missile Vessels (balance order value of ₹ 9803 crore)
with post commission works of Indigenous Aircraft Carrier (pending order

ICICI Securities – Retail Equity Research

Price Chart
value of ₹ 1340 crore) are expected to witness meaningful execution during 400
FY24 and FY25. Moreover, on commercial vessels front, all the domestic & 350
export contracts in hand, are under execution as per schedule 300
250
• Order pipeline remains healthy in ship-building and ship-repair 200
segments; provides longer term growth visibility: Order pipeline remains 150
strong in defence and commercial ship-building and ship-repair segments 100
including exports. About ₹ 13000 crore worth of ship-building contracts are 50
in pipeline; tenders expected to be floated in medium term. Apart from these, 0
₹ 84000 crore worth of orders are in RFP stage as per the management. In 02-Nov-20 09-Nov-21 16-Nov-22 23-Nov-23

defence segment, we believe that India Navy’s future plan of warships CSL BSE Midcap

procurement presents a strong prospects for CSL. Discussions on another

aircraft carrier are also in advanced stages and offers additional order Key risks Key Fina
opportunity of ₹ 40000 crore. In commercial segment, electric vessels (i) dependence on government
opportunity emerges from Europe as 2500 vessels are scheduled to be contracts in defence segment
replaced with green vessels. In ship-repair segment too, company sees
(ii) dependence on foreign vendors for
sizable opportunity in both defence & commercial industries
electronic components/sub-systems
Rating and Target Price
Research Analyst Key Fin
• We expect CSL to witness significant YoY growth in revenues & profitability
over FY24-25E, led by execution pick-up in both the segments and Chirag Shah
increasing share of margin accretive ship-repair segment. We estimate shah.chirag@icicisecurities.com
revenue, EBITDA and PAT to grow at ~34%, ~78% and ~52% CAGR
Vijay Goel
respectively over FY23-25E as against the de-growth seen over FY20-23
vijay.goel@icicisecurities.com
• Valuations look attractive considering the multiple growth drivers. We value
CSL at ₹ 1340 i.e. 25x FY25E P/E

Key Financial Summary

2 Year
3 Year CAGR
(₹ Crore) FY20 FY21 FY22 FY23 FY24E FY25E CAGR (FY23-
(FY20-FY23)
25E)
Revenues 3,422 2,819 3,191 2,366 (11.6) 3,458 4,269 34.3
EBITDA 709 716 623 248 (29.5) 606 787 78.0
EBITDA margins 20.7 25.4 19.5 10.5 17.5 18.4
Net Profit 638 611 564 305 (21.8) 601 705 52.1
EPS (| ) 48.5 46.4 42.9 23.2 45.7 53.6
P/E (x) 23.1 24.1 26.1 48.3 24.5 20.9
Price / Book (x) 3.9 3.6 3.4 3.3 3.1 2.8
EV/EBITDA (x) 17.9 17.6 18.7 40.6 17.9 14.8
RoCE (%) 17.6 14.1 11.4 4.3 9.1 10.4
RoE (%) 17.1 14.9 12.7 7.9 12.5 13.4
Source: Company, ICICI Direct Research
 Shubh Nivesh | Cochin Shipyard ICICI Direct Research

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 Shubh Nivesh | Cochin Shipyard ICICI Direct Research

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