Cochin Shipyard (CSL) is the largest Indian public sector shipyard and it received “Miniratna” status in 2008. CSL operates a shipyard that provides shipbuilding and ships repair services in both defence and non-defence spaces. CSL generates 74% from shipbuilding and 26% from ship repair.
Outlook & Valuation: In terms of valuation, pre- issue works out to 15.7x of FY2017 EPS (at the upper end of the issue price band), which is reasonably priced on the back of – (1) healthy order book with execution capability and experienced management; (2) Average RoE & ROCE for last 5 years +15%; (3) Despite cyclical business it has maintained net cash positive balance sheet; (4) easing working capital cycle from >195 days in FY2012 to current 59 days. Considering the past financial performance of CSL and strong visibility on future growth, we rate this issue as SUBSCRIBE.
Cochin Shipyard Ltd
Published on 31st July 2017
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