COCHIN SHIPYARD LTD Rs 2400
Not many people would have heard the name Neeraj Chopra before he won the Gold Medal in 2020 Tokyo Olympics though he had been holding India’s national record since 2015. Fame and fortune came only when he competed and won against the best in the world.
This phenomenon applies to Indian PSU defence companies even more acutely. For decades, they were winners in races where they were the only runners. Government gave them orders on Nomination Basis i.e. without any competing bidders. Though these companies served the national cause very well, there was little applause from the stock market. But things have changed in the last few years after defence production was opened to the private sector. Not only many of these PSUs have become domestic champions, some of them are doing a Neeraj Chopra as well. They are competing against the best in the world and winning export orders.
Cochin Shipyard Ltd (CSL) is one such company. Besides the deluge of domestic orders flowing its way due to defence indigenisation push, CSL is winning export orders from technologically advanced regions such as Europe. This is a resounding validation of CSL’s technical and pricing competitiveness against the best of the world. Sure enough, fame and fortune are pouring. The stock has almost gone up almost 10 times in the last one year.
CSL’s order book at the end of FY 2024 stood at around 7 times its 3830 cr revenues for the year. Of this 17% was from exports. More strikingly, its ‘order pipeline’ of 10000 cr was dominated by export enquiries to the tune of 65%. Besides export orders for new vessels, it has signed a ship repair agreement with the US Navy in Apr 2024. This is expected to give a significant push to its revenues in coming years.
FY 2024 was a bumper year for CSL with revenues up 61%, Ebitda up 156%, PAT up 157% at 783 cr, EPS up 157% at Rs 30. Management has guided FY25 to clock topline growth of 20-25% with some margin shrinkage. At the current market price of Rs 2400, CSL is trading at a very high trailing PE of 80 due to expectations of continued high growth in the domestic and export markets.
CSL is in a sweet spot with both domestic and export growth engines firing. The biggest unknown is its execution capabilities. Getting orders is one thing but completing them to the satisfaction of the client within the promised time frame without cost escalations is another. CSL has no dearth of orders, execution will determine if it is able to get another podium finish for its investors.