Cochin Shipyard set for growth amid strong order backlog: Report

Cochin Shipyard (CSL) is set to chart a course for growth fuelled by robust order backlog and strategic expansion initiatives, brokerage firm ICICI Securities said in a report

In the fiscal year 2023, CSL's ship-building segment contributed approximately 74 per cent to its total revenues of Rs 2,364.6 crore, while the ship-repair segment accounted for the remaining 26 per cent. The company's order backlog, a key indicator of future growth prospects, stood at Rs 22,300 crore as of December 2023, with ship-building contracts amounting to Rs 21,500 crore and ship-repair contracts totalling Rs 800 crore, the brokerage said.

The company has strong capabilities in both ship-building and ship repair, supported by advanced infrastructure and state-of-the-art facilities. The company's recent investments in new dry dock facilities and the International Ship Repair Facility (ISRF) have significantly enhanced its operational capabilities. With a robust order backlog representing approximately 7 times its trailing twelve-month revenues, CSL is well-positioned for revenue growth driven by the execution of diversified projects, ICICI Securities said.

CSL is set to witness meaningful execution of large-scale contracts for Navy, including anti-submarine corvettes, next-gen missile vessels, and post-commission works of the Indigenous Aircraft Carrier. These projects are expected to drive revenue growth over the forecast period, ICICI Securities said.

The company's order pipeline remains healthy, with major opportunities in both defence and commercial ship-building and ship-repair segments. With approximately Rs 9,000 crore worth of ship-building contracts in the pipeline and discussions underway for additional contracts worth Rs 8,4000 crore, CSL is well-positioned to capitalize on future growth opportunities.

The company stands to benefit from emerging opportunities in the commercial segment, particularly in the electric vessels market. With Europe set to replace 2500 vessels with green vessels, it is poised to capitalise on this trend and expand its market presence.

Analysts at ICICI Securities expect CSL to witness year-over-year growth in revenues and profitability over the forecast period, driven by execution pick-up in both segments and an increasing share of margin accretive ship-repair contracts. With revenue and profit estimated to grow at a compound annual growth rate (CAGR) of approximately 23 per cent and 36 per cent respectively over the forecast period, CSL's valuations appear attractive. Analysts value Cochin Shipyards at Rs 1,055 per share, representing a price-to-earnings (P/E) multiple of 36 tines FY26 earnings.