Cochin Shipyard Ltd: Promising ship-builder!
(BSE Code: 540678) (CMP: Rs.388.90) (FV: Rs.10)
Incorporated in 1972, Cochin Shipyard Ltd (CSL) is the largest public sector shipyard in India in terms of dock capacity. It conferred the ‘Mini Ratna’ status in 2008. It operates through two business segments: shipbuilding and ship repair. In both segments, it caters to clients from the defence as well as commercial shipbuilding sectors. In addition, it also offers marine engineering training.
CSL’s shipyard is strategically located along the west coast of India, midway on the main sea route connecting Europe, West Asia and the Pacific Rim, which is a busy international maritime route. It is also close to the Kochi port as well as offshore oil fields on the western coast of India, relatively close to the Middle East. It has two docks – ship repair dock and shipbuilding dock. Dry docks are used for the construction, maintenance and repair of ships, boats and other watercraft. Its ship repair dock is one of the largest in India and enables it to accommodate vessels with a maximum capacity of 1,25,000 DWT. Its shipbuilding dock can accommodate vessels with a maximum capacity of 1,10,000 DWT. CSL has worked with several leading technology firms like Rolls Royce Marine (Norway) and Gaztransport & Technigaz (GTT) SA. Its key shipbuilding clients include the Indian Navy, the Indian Coast Guard and SCI. Its key ship repair clients
include the Indian Navy, the Indian Coast Guard, SCI, ONGC and DCI. Its docks ran at full capacity in FY17 due to which it had to turn down new requests.
CSL with 75% promoter stake, more than Rs.1600 crore of free cash on the balance sheet, market leadership with ~39% market share, growing order book, debt-free status, best-in-class working capital cycle, reliability in execution and being a natural beneficiary of large and critical government projects is in a sweet spot. Buy this stock on every decline for double-digit returns.