Shares of Cochin Shipyard Ltd. are likely to fall nearly 42% from current levels, according to brokerage firm Kotak Institutional Equities, which has a 'Sell' rating on the state-run defence company. Kotak has set a price target of ₹860 per share, implying a downside of around 42% from Cochin Shipyard's closing price of ₹1,492 on Friday.
The brokerage's bearish view comes after the company's June quarter results, which declined year-on-year across key financial parameters. Net profit fell 27.7% year-on-year to ₹135.8 crore from ₹187.9 crore. Revenue declined 6.9% to ₹910 crore from ₹977 crore.
EBITDA fell 32.5% to ₹157.6 crore from ₹233.6 crore, while EBITDA margin contracted to 17.33% from 23.91% a year earlier. Kotak said the results were 10% ahead of its expectations, with better-than-expected execution offsetting an in-line margin performance.
However, profitability declined 28% year-on-year and 37% quarter-on-quarter, driven by partial margin normalisation following the execution of one-time ship repair orders for INS Vikrant and INS Vikramaditya, the brokerage said. What Kotak sees aheadAccording to Kotak, progress on tie-ups with HD KSOE , Maersk and Drydocks World, along with the recently announced expansion of the ship repair facility at Vadinar, will be key catalysts for the company.
The brokerage also expects India's ₹70,000-crore shipbuilding package announced by the government to provide a structural boost to the sector. However, Kotak maintained its 'Sell' rating on Cochin Shipyard and a price target of ₹860. Among the five analysts covering Cochin Shipyard, three have a 'Buy' rating, while one each has a 'Hold' and 'Sell' rating on the stock.
Shares of Cochin Shipyard ended 1% lower at ₹1,492 on Friday. The stock has declined around 8% so far this year.