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- 13 Feb 2023
- ICICIdirect Research
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COCHIN SHIPYARD'S WEAK EXECUTION IMPACTS REVENUES BUT MARGIN IMPROVES SIGNIFICANTLY
COCHINSHIP - 2022 Change: -30.20 (-1.47 %)News: Revenue came in at Rs 641.7 crore in Q3FY23; down 32.7% YoY as both segments, shipbuilding and ship-repair, witnessed weak execution and reported decline in revenues by 36.7% YoY and 19.6%, respectively. Sequentially, revenue is down 6.1% (ship building revenue is down 12.5% QoQ while ship-repair revenue increased 15.8% QoQ). Gross margin improved significantly to 47% (+1746 bps YoY, +744 bps QoQ) on lower raw material cost. EBIDTA margin was at 23.2% (+835 bps YoY, +339 bps QoQ). EBITDA came in at Rs 148.8 crore; up 5.2% as better margins negated the impact of decline in revenues. EBIT from ship-building segment was at Rs 112.5 crore (down 14.5% YoY) while ship-repair segment EBIT increased sharply by 117.3% YoY to Rs 59 crore. PAT came in at Rs 110.4 crore (down 14.7% YoY) as other income is down by 63.2% YoY
Views: Execution during the quarter was below expectations, mainly in shipbuilding segment (72% of total revenue). However, margins came in better mainly led by lower raw material cost and better performance in ship repair segment. Order backlog at ~Rs 21000 crore (~7x TTM revenues) gives strong revenue visibility. The majority of the large contracts in order book is expected to witness meaningful execution from FY24E onwards (like six NG Missile Vessels, ASW corvettes, export order of vessels). Moreover, ship-repair segment, which is picking up, would see more good opportunity in the future post the expansion of facilities at Mumbai, Kolkata and Port Blair. Overall outlook remains positive on CSL as it has a strong earnings visibility for the coming years considering healthy order backlog and strong opportunities in shipbuilding (in both domestic & exports) and ship repair segments
Impact: Neutral