1:2 Split, Rs 9.75 Dividend; Zero Debt Defence PSU Stock Hits Back-To-Back 5% Upper Circuits; Experts Says BUY

Cochin Shipyard, a PSU company engaged in the defence and shipping sector, has witnessed stellar buying since the start of this week's trading session. The zero-debt PSU stock has touched back-to-back upper circuits for three consecutive trades, while it has been in green for four sessions in a row. That being said, Cochin has not witnessed any sellers this week, while it has gained by 16% in 4 days. Is there room to buy further?

Cochin Shipyard Share Price:

On BSE, the PSU stock touched a 5% upper circuit to Rs 1503.10 apiece, with a market cap at Rs 39,543.67 crore on November 27. The stock had touched 5% upper circuits each on November 26 and November 25th as well. Upper circuits mean that there were several buyers in a stock but no sellers.

Apart from back-to-back 5% upper circuits this week, Cochin's shares have been on a winning streak for the fourth consecutive session now. From November 22 to November 27, Cochin shares have jumped by Rs 16%. The last time the stock was in red was on November 21, down by 5%.

Among the key reasons are a bullish market trend and, the surge in PSU stock after the Maharashtra election results. Additionally, Cochin shares are in green since it bagged a big new order.

As per the regulatory filing, Cochin Shipyard Limited (CSL) has entered into a Memorandum of Understanding (MOU) with Seatrium Letourneau USA, Inc. (SLET) for the design and critical equipment for jack-up rigs for the Indian Market.

Further, building on CSL's extensive experience in ship construction and engineering and SLET's renowned technical expertise and design capabilities, this partnership aims to capitalize on opportunities for Mobile Offshore Drilling Units (MODUs) designed to meet the needs of the Indian market, the filing said.

The tie-up is seen in the Government's efforts under the "Make in India" initiative.

BUY Cochin Shipyard Shares?

The latest to recommend BUY on Cochin share is Centrum. The brokerage believes Cochin's long-term prospect has improved in terms of capacity expansion, order visibility and improving ship repair orders.

Centrum's note said, "With current order backlog of 5x FY25, we anticipate 17% CAGR earnings over FY24-FY26E. CSL witnessed a 61% correction in valuation and is currently trading at 1 Yr Fwd P/E of 30x. Considering, sharp moderation in valuation and healthy earnings, we value CSL at a P/E multiple of 37x on FY26E, assigning a BUY rating on the stock with a target price of Rs.1,557."

Furthermore, brokerage Antique Stock Broking highlighted that Cochin Shipyards has the largest capacity in the country (currently working on 47 vessels simultaneously) and is well placed with facilities in Andaman and Nicobar, Cochin which are near major international maritime traffic routes in the Indian Ocean. Though it is the only shipyard with prior experience in building aircraft carriers, the prospect of a second aircraft carrier and tentative timeline remain unclear. On the non-defence front, the focus is on shipbuilding and green energy platforms such as hybrid ferries, and green tugs, which offer decent opportunities for growth.

On the valuation, Antique's note said, "The company's order book to the tune of INR 225 bn with major projects on track to be executed in the next 2-3 years provides topline visibility. Though it is the largest shipyard in terms of capacity (and the only one to have prior experience in building aircraft carriers) prospective timeline for the second aircraft carrier remains uncertain. We maintain an HOLD rating with a TP of INR 1,627 (earlier INR 1,622) at a core target P/E multiple of 33x FY27 earnings."

YTD, the stock has rewarded investors with a 1:2 stock split and up to Rs 9.75 dividends in three ranges.

Cochin is going to deliver an interim dividend of Rs 4 per share and for this, it turned ex-date on November 19, 2024. Earlier, the company also delivered dividend final dividend of Rs 2.25 per share and an interim dividend of Rs 3.50 per share for FY24, and their ex-dates were on September 23 and February 12 of this year. Additionally, the stock was split by a 1:2 ratio on January 10, 2024, where the face value of Rs 10 each is cut to Rs 5.

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. CSL has secured shipbuilding orders from internationally renowned companies from Europe & Middle East and has been nominated to build the country's first indigenous Air Defence Ship. The shipyard commenced ship repair operations in the year 1982 and has undertaken repairs of all types of ships including the upgradation of ships of the oil exploration industry as well as periodical layup repairs and life extension of ships of Navy, UTL, Coast Guard, Fisheries and Port Trust besides merchant ships of SCI & ONGC.