ICICI Direct initiated coverage on Cochin Shipyard Ltd. with a ‘Buy' rating, calling it a ‘quality play' on improving business mix, healthy order book, a strong balance sheet, and superior return profile.
Shares of the South India-based shipbuilder rose as much as 3.5 percent following a 10.9 percent jump on Tuesday after the company won an order worth Rs 5,400 crore.
Cochin Shipyard is one of the most stable companies in the Indian shipbuilding and ship repair sector, the brokerage said in a note. The company is likely to receive order worth Rs 10,900 crore for phase III of Indiana Administrative Code, adding to its already healthy order book.
The shipbuilder is looking expand its current operations by building a new larger size shipbuilding and repair facility at a cost of Rs 2,768 crore, which is anticipated to be fruitful for the company.ICICI Direct on Cochin Shipyard
Besides that, CSL also enjoys a competitive advantage owing to its large drydock capacity that attracts large defense vessels for repairs, the brokerage said.
ICICI Direct said that the only negative for the company can emerge in the form of negative cash flows over the two years, led by its heavy capital expenditure of Rs 2,800 crore in the period.
Also Read: Cochin Shipyard Bags Rs 5,400 Crore Order From Indian Navy
ICICI Direct's Estimates in compound annual growth rate terms:
- Revenue to grow at 18 percent CAGR
- Earnings before interest, tax, depreciation and amortisation to increase 14 percent CAGR
- Net profit to increase at 8 percent CAGR
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