Defence PSU Stock Locked At Upper Circuit Again!
Shares of Cochin Shipyard Ltd have been on a tear, hitting upper circuits in 5 out of the past 6 days. Explore the reasons behind this impressive rally and whether it's the right time to invest in this defence PSU.
Stocks in News | Cochin Shipyard Ltd has been the talk of the town of late, with its stock hitting the upper circuit in 5 out of the past 6 trading sessions. This impressive momentum continued on December 2nd, with the stock reaching Rs 1,656.15 on the National Stock Exchange (NSE).
This remarkable rally comes on the heels of a recent contract win. On November 30th, the company announced a Rs 1,000 crore contract with the Ministry of Defence for the short refit and dry docking of a large Indian Naval Vessel. The project is expected to take approximately 5 months to complete.
Key Factors Fuelling Cochin Shipyard’s Rally
What are the other factors driving this rally? Let’s break it down:
- A Robust Order Book and Diversified Portfolio
With an order book valued at Rs 22,500 crore as of September 2024, Cochin Shipyard has a solid foundation for future revenue growth. The company’s portfolio spans multiple sectors, including defence, commercial, and export projects. This diversified mix ensures stable and recurring revenue streams, giving investors confidence in the company’s long-term prospects.
- Solid Financials and Strong Growth
Cochin Shipyard is a net debt-free company with improving financials and impressive profitability margins. In FY24, the company reported an EBITDA margin of 32% (up from 23% in FY23) and a PAT margin of 22% (up from 14%). Return on Net Worth (RONW) also doubled from 8% to 16%.
- Boost from Government Initiatives
The Indian government’s push to increase local defence spending from 60% to 75% is a game-changer for companies like Cochin Shipyard. With India allocating $20-25 billion annually to enhance domestic defence capabilities, Cochin Shipyard stands to benefit significantly from this policy shift.
As a leader in shipbuilding, repairs, and defence manufacturing, Cochin Shipyard is well-positioned to capitalize on growing demand in the defence sector. The company’s track record in delivering high-quality ships and defence systems strengthens its competitive edge.
- Strategic Partnerships: A Catalyst for Growth
Cochin Shipyard’s collaboration with Seatrium Letourneau USA, Inc. (SLET) is one of the key drivers behind its recent stock rally. This partnership focuses on designing and supplying critical equipment for jack-up rigs specifically for the Indian market.
The deal supports India’s “Make in India” initiative, promoting local manufacturing and reducing import reliance. Cochin Shipyard’s extensive experience in shipbuilding, combined with SLET’s technical expertise, positions the company to capture opportunities in the Mobile Offshore Drilling Units (MODUs) sector.
Dividend News: A Cherry on Top
Cochin Shipyard has announced an interim dividend of Rs 4 per share, with the record date set for November 20, 2024. Shareholders can expect to receive the payout by December 6, 2024.
This follows the company’s previous dividends—Rs 2.25 per share in the final dividend and Rs 3.50 per share as an interim dividend for FY24.
Should You Buy Cochin Shipyard Shares Now?
Cochin Shipyard’s solid fundamentals, strategic partnerships, and exposure to booming sectors like defence and commercial shipbuilding make it a compelling investment option. With the backing of government initiatives and a diversified portfolio, Cochin Shipyard is well-positioned for long-term growth.
Wondering whether now is the right time to invest in Cochin Shipyard? For expert guidance, consult LiMo, the world’s first AI copilot for stock investing, available exclusively through Liquide. LiMo offers in-depth analyses and actionable insights, helping you make smarter decisions on when to buy and sell stocks.
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