Initiating coverage on Cochin Shipyard Ltd by Ventura

Cochin Shipyard Ltd (CSL) is India’s leading PSU shipyard that has reported strong revenue growth despite the poor performance of the ship building industry, not only globally but also in the domestic market. The primary drivers of revenue growth are the strong order flows from the defense sector (64% of FY17 revenues) and the ship repair vertical. CSL has been able to grow despite the poor industry outlook. The existing order booj from defense (including the IAC Phase II) and commercial operations along with steady business from the ship repair vertical augurs well fro the business prospects going forward. CSL is also undertaking capex to set up a new dry dock and ISRF (International Ship Repair Facility) which should cater to increased revenues with an expectation of improved profitability.

The proposed issue is for an aggregate amount of 3,39,84,000 no of shares of Rs 10 each. This includes an offer for sale of 1,13,28,000 shares and the balance 2,26,56,000 by issue of fresh equity. This is being offered to the public at a price range of Rs 424 per share (lower price band) to Rs 432 per share (upper price band). The retail portion has a discount of Rs 21 per share (or its pricing is at Rs 403 per share at the lower band and Rs 411 at the upper band). The valuation on a trailing basis works out to 15.7 and 15.4 FY17 PE at the upper and lower band. For the retail segment the valuation works out to 14.9 / 14.6 (upper band /
lower band) FY17 trailing PE.

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01082017111355Cochin Shipyard Report- Ventura Securities