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Cochin Shipyard IPO: Nirmal Bang recommend subscribing to the issue

Nirmal Bang | 01 Aug, 2017  | Follow Author | Add to my Favourites 
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Cochin Shipyard Ltd. - IPO Note


Price Band: Rs. 424– Rs. 432


Issue Date: 1st – 3rd    Aug


Recommendation: Subscribe






Cochin Shipyard, incorporated on March 29, 1972, is a wholly-owned GoI company. It was conferred the 'Miniratna' status in 2008, by the Department of Public Enterprises, GoI. Cochin Shipyard is the largest public sector shipyard in India in terms of dock capacity. As of Jan, 2017, Cochin shipyard has 2 docks used for ship repair and shipbuilding. It caters to clients engaged in the defence sector in India and in the commercial sector worldwide. In FY17, revenue from defence sector was around 84.6% to total revenue. Key clients include the Indian Navy and the Indian Coast Guard, Clipper Group, SCI, NPCC, Vroon, SIGBA AS, DGLL



Investment Rationale:



a)   Expansion on cards


b)  Strong Order Book


c)   Change in Revenue Mix


d)  Only Shipyard in India to build Aircraft carrier


e)  Strong financials



Details & Objects of the Issue:



The public issue of Cochin Shipyard Ltd. consists of fresh issue of ~Rs 979 cr and offer for sale of Rs. 489 Cr (at upper price band) by the promoter group .The object of the issue  is to


a)    Set up a new Dry Dock( Rs 443 Cr)


b)   Set up a new ISRF (Rs. 229.5 Cr )


c)    General Corporate Purposes




Valuation and Recommendation:


CSL enjoys status of only shipyard building aircraft carrier which will place CSL in select category of shipyard in world. Apart from existing order of aircraft carrier it has opened up immense opportunity of new business. The govt initiative of Make in India in defence sector also augur well for CSL as its revenue contribution from defence is 84.6% in FY17. The ship repair business with high margin business profile is growing faster than the ship building business leading to improvement in margin. Company has healthy order of 2936cr + Phase III of aircraft carrier order. Apart from this, the company has healthy pipe line of new order. The aggressive expansion plan will support the growth of the company in long run. Over, FY15- FY17 the company sales has grown at a CAGR of 14.1% however Ebitda has grown at a CAGR of 106.4% and PAT at a CAGR of 112.3%. Company enjoys ROE of 15.4%. On the valuation front, at the given upper price band of issue of Rs 432, Cochin shipyard is offered at PE of 18.8x its FY17 EPS of Rs 23 and FY17 EV / Ebitda of 10.5x which is lower to its peer. We recommend subscribing to the issue.

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About Nirmal Bang

Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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