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Cochin Shipyard – Execution remains strong in both ship-building and ship-repair segments

ICICIdirect Research 09 Aug 2024 DISCLAIMER
  • Overall performance has improved significantly on YoY basis as execution picked up sharply in both the segments (ship-building and ship-repair). Revenue increased by 62% YoY as ship-building segment revenue (68% of total) increased by 62% YoY and ship-repair segment revenue (32% of total) grew by 63% YoY. The sharp growth is also on account of low base as the execution was muted during the period Q1FY23 to Q1FY24, due to some design changes and supply chain issues in one defence contract of anti-submarine corvettes
  • With positive operating leverage and better gross margins, EBITDA margin has also improved substantially by 645 bps YoY (+57 bps QoQ) to 23.0%. EBIT margin of ship-building remained largely in the range of 17-19% while it has improved sharply for ship-repair segment to 43% (+1872 bps YoY)
  • Over the last 3 quarters, ship-repair segment margin has been high at 42-43%, possibly because of some high margin orders executable over the short term
  • Full year margin guidance by the management was given at 17-19% in last earnings call as they guided sustainable EBIT margins of 22-23% in ship-repair
  • Company’s order backlog is estimated to be at ~Rs 21500 crore (5.4x TTM revenues) provides strong revenue growth visibility over the next 2-3 years
  • Commissioning of new dry-dock and ISRF (International Ship Repair Facility) projects would further expand manufacturing capacities and orders intake capabilities
  • Order pipeline remains strong across defence & commercial ships/vessels (domestic and exports) and ship-repair. As per the management, ~Rs 10000 crore worth of ship-building contracts are in pipeline and tenders expected to be floated in medium term. Apart from these, ~Rs 50000 crore worth of projects are in RFI (request for information) stage as per the management
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