Domestic brokerage firm Kotak Institutional Equities has upgraded its rating on Cochin Shipyard by one notch to 'Reduce' from 'Sell', citing CSL's strong margin performance. Kotak highlighted that the stock corrected 20% from its recent high and 10% since its downgrade.

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Cochin Shipyard shares have gained 13.5% in the last four trading sessions. On Wednesday, the scrip climbed 3% to hit a day high price of ₹1,073.30 over its previous close of ₹1,038.55. At this price, the multibagger counter has rallied 100% since the beginning of this year.

For the September quarter, Cochin Shipyard reported an all-around beat, as robust execution across shipbuilding and ship repair was aided by strong margin performance, Kotak said.

The company posted a net profit of ₹181.5 crore, a growth of 61% compared to the same period last fiscal. Revenue for the quarter also rose by 48% year-on-year to ₹1,011.7 crore.

Operating profit, calculated as EBITDA, grew 41.2% on-year to ₹191.2 crore, while margin narrowed by 80 basis points to 19%.

The shipbuilding company remains on track to achieve its guidance of 64% top-line growth in FY24. While margins have a high variation across quarters, the H1FY24 EBITDA margin came in at 19.8%, significantly ahead of the guided range of 14-15%, the brokerage noted.

Kotak raised its FY24, FY25 and FY26 estimates by 10%, 3%, and 4%, respectively, largely owing to higher margin. "We are now closer to the higher end of the guided range," the brokerage said, raising its target price to ₹1,030 from ₹990.

Stock split, dividend announced

The company also announced a stock split and an interim declared dividend along with its September quarter results. The board has approved an interim dividend of ₹8 per share for the financial year 2023-24. The record date for the same has been fixed as November 20.

Cochin Shipyard said the interim dividend would be paid to the eligible shareholders on or before December 6, 2023. Besides, the company said its board has approved the sub-division or stock split of existing one share of face value of ₹10 each fully paid up into two equity shares with face value of ₹5 each.

The Indian Navy is eyeing a repeat order of INS Vikrant (IAC-1), and Cochin Shipyard's past track record places it in the pole position to win the order. "Currently, in our estimates, we factor in the potential repeat order at a 10% lower cost than IAC-1 and seven-year execution period. The outcome of the repeat IAC order holds the key for the CSL stock, in our view," Kotak said.

(Edited by : Amrita)

First Published:Nov 8, 2023 10:28 AM IST