1:2 Split, Rs 5.75/Dividends YTD: Zero-Debt PSU Stock Hits 5% Lower Circuit, OFS Oversubscribed; Next Target?

Zero-debt miniratna PSU company, Cochin Shipyard touched its 5% lower circuit on Wednesday, October 16, 2024. This is due to the government's offer for sale (OFS), where the centre is divesting up to 5% stake worth more than Rs 2,000 crore. The first day of the OFS was a hit as the government's base size oversubscribed by over 2 times. Retail investors will be able to bid on October 17. Amidst this, the consensus is that the latest correction in Cochin could lead to a fresh upside in the coming months. However, the expert's recommendation is to hold on to Cochin.

Cochin Shipyard Share Price:

After market hours, Cochin shares were frozen at 5% lower circuit to Rs 1,588.50 apiece on October 16, meaning, there were no buyers in the stock in the session. Cochin's market cap is around Rs 41,790.38 crore.

The stock's 52-week high and low are at Rs 2,977.10 apiece and Rs 435.75 apiece respectively.

Data from Trendlyne showed that the company's debt-to-equity ratio of 0 is less than 1 and healthy, which implies that its assets are financed mainly through equity. While the stock rose 208.42% and outperformed its sector by 132.05% in the past year. Further, its Return on Equity(ROE) for the last financial year was 15.65%, in the normal range of 10% to 20%. However, the Price to Earning Ratio is 48.65, higher than its sector PE ratio of 34.7.

Cochin Shipyard Offer For Sale (OFS):

The OFS has commenced from October 16. On the first day of the bidding, Cochin received bids of 1,28,00,336 equity shares from non-retail investors, oversubscribing the issue by 2.16x or 216.25%. The first day of the bidding was reserved for only non-retail investors.

The base size of the OFS by the government was a stake sale of 65,77,020 Equity Shares, representing 2.5% of the total paid-up equity share capital on October 16. While government also announced the option to additionally sell 65,77,020 equity shares (representing 2.50% of the total issued and paid-up equity share capital -- which is called as 'Oversubscription Option'.

In the late hours of Wednesday, the government announced that they will exercise the Oversubscription Option.

Hence, in total, the offered size is now up to 13,154,040 Equity Shares (representing 5.00% of the total paid-up equity share capital of the Company) of which 1,315,404, i.e. 10% of the Offer, would be available for Retail Category on T+1 day, i.e. October 17, 2024, subject to receipt of valid bids, as part of the Offer. Additionally, 25,000 Equity Shares will also be offered to the Employees on T+1 day, i.e. October 17, 2024.

Next Target Price In Cochin?

As per Trendlyne data, the consensus recommendation from 2 analysts for Cochin Shipyard Ltd. is HOLD. The average 1-year target price is set at Rs 897.50 apiece.

However, broker Antique Stock Broking has recommended HOLD on Cochin as well, but the target price is higher to Rs 1,622 apiece from the CMP.

Meanwhile, Parth Jaiswal, a NISM and AMFI-registered expert believes the stock will be climbing to an all-time high, and it is just a matter of time. It needs to be noted that Jaiswal has not given any buy or sell recommendation, and his views are just for educational purposes.

Through his X handler, Jaiswal stated that with recent OFS by the government, will induce more buying thus forming a strong base. He believes the bearish trend will reverse soon in Cochin, and potential target prices could be Rs 1,900, Rs 2,955 and Rs 3,450 going forward.

So far, in 2024, Cochin has carried one stock split in the ratio of 1:2 on January 10, where its face value of Rs 10 is trimmed to Rs 5. While the company has delivered two dividends - an interim dividend of Rs 3.50 per share (ex-date February 12), and a final dividend of Rs 2.25 per share (ex-date September 23).

Cochin Shipyard was incorporated in the year 1972 as a fully owned Govt of India company. In the last three decades the company has emerged as a forerunner in the Indian Shipbuilding & Ship repair industry. This yard can build and repair the largest vessels in India. It can build ships up to 1,10,000 DWT and repair ships up to 1,25,000 DWT. The yard has delivered two of India's largest double hull Aframax tankers each of 95,000 DWT.