Nifty Defence Stocks Rally for 6th Day: Cochin Shipyard Jumps 13% on May 16 ; But Kotak Sees 60% Downside Risk

Defence PSU Stocks Today: Shares of Cochin Shipyard Limited, a leading state-run defence and shipbuilding firm, have surged 40% over six consecutive sessions, including a 13% jump after its Q4 results on May 15, pushing the stock above Rs 2,030. However, Kotak Institutional Equities warned in a note on May 16 that the stock could fall nearly 60% from current levels, despite the recent rally.

Nifty Defence Stocks Today: Cochin Shipyard Stocks in Lead

Defence sector stocks have rallied for the sixth consecutive session on Friday, with Cochin Shipyard, Mazagon Dock Shipbuilders, and Bharat Electronics Ltd (BEL) among the top gainers, as investors welcomed the government's renewed focus on domestic defence production.

The Nifty India Defence index touched a fresh 52-week high during the session, registering a rise of up to 20% since May 9. All 18 constituents of the index were trading in the green on Friday, with some stocks gaining as much as 15% intraday.

Cochin Shipyard Share Price: Mazagon Dock, BEL Stocks Continue to Surge

On May 16, shares of Cochin Shipyard Ltd surged by 12.09%, rising Rs 219.10 to trade at Rs 2,031.20. Mazagon Dock Shipbuilders Ltd also witnessed a sharp gain, climbing 9.02% or Rs 287.10 to reach Rs 3,469.50 as of 12:27 pm. Meanwhile, Bharat Electronics Ltd (BEL) saw its stock rise 5.45%, up Rs 19.10, trading at Rs 369.50 as of 12:58 pm.

This rally is driven by Prime Minister Narendra Modi's recent emphasis on bolstering India's homegrown military capabilities. "India has demonstrated its expertise in modern warfare. The time has arrived for 'Made in India' defence equipment," PM Modi said earlier this week, pointing toward continued policy support for indigenous defence manufacturing under the Make in India initiative.

What should investors do after such a sharp rise in Cochin Shipyard's stock?

Axis Securities has picked Cochin Shipyard as a momentum stock. The brokerage has recommended buying this defence stock in the range of Rs 1,770-1,702. The stock closed at Rs 1,812 yesterday. Axis has set the first target at Rs 2,080 and the second target at Rs 2,185. A stop-loss of Rs 1,565 has been advised to protect profits and manage potential trend reversals. Notably, the stock had reached an all-time high of Rs 2,977 in July 2024 and hit a low of Rs 1,180 on February 18, 2025. So far, it has recovered more than 70% from its low, but even at the current price, it remains about 32% below its peak.

60% Downside Target for Cochin Shipyard: Kotak's Bearish View

Post Q4 results, Antique has issued a report on Cochin Shipyard, giving it a 'HOLD' rating with a target price of Rs 1,640. In contrast, Kotak Securities has taken a very bearish view, assigning a target of just Rs 850. Cochin Shipyard's current market cap stands at over Rs 52,700 crore, with a free float market cap of Rs 17,235 crore. The stock has attracted 989,140 retail investors, who hold an 18.98% stake-roughly 5 crore shares. Domestic institutional investors (DIIs) hold 6.82%, including mutual funds at 3.42% and insurance companies at 3.39%.

Kotak Securities noted that the company's margins remain under pressure, primarily due to increased provisioning. Although income and profit are rising, this is largely due to higher other income. The repair order for INS Vikrant contributed positively to the company's performance this year. However, a lack of new orders from the Indian Navy is a concern, as the company hasn't secured any major naval contracts in the past two years. This poses several challenges for its near-term outlook.

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Cochin Shipyard Q4 Results 2025

In Q4, Cochin Shipyard's revenue rose 37% year-on-year to Rs 1,758 crore. Net profit increased 10.8% to Rs 287 crore. However, operating profit (EBITDA) declined 7.6% to Rs 266 crore, and the margin fell from 22.40% to 15.10%. On a quarterly basis, revenue rose 53.2%, EBITDA increased 11.9%, and net profit jumped 62%. Despite these gains, the EBITDA margin dropped to 15.1% in Q4 from 20.7% in Q3 and 22.4% in the same quarter last year, indicating a consistent downward trend in margins, which remains a negative signal.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.