For Cochin Shipyard, new capacity commissioning, orders to ensure smooth sailing

Factors that drove profitability included a 62% increase in revenue, lower employee expenses and other costs. Similar trends were seen in FY24 when revenue and Ebitda growth stood at 56% and 230%, respectively.  Ebitda is earnings before interest, tax, depreciation and amortization.

While a low base aided Q1 growth, the company is projected to maintain the growth momentum, thanks to its strong order backlog and newer capacities coming online. 

The public sector undertaking has an order backlog of ₹22,000 crore, over five times its trailing twelve-month sales, which should help meet its guidance of 20-25% revenue growth for FY25. 

Increasing share of commercial ships, which now account for 25% of order book with the rest coming from defence, has helped improve Cochin Shipyard’s order book position. 

The company is gaining from its higher focus on the export market, primarily Europe. Against the existing share of 18% in order backlog, exports' share in order pipeline stands at 65%. According to the company, about 60% of its export orders are for ‘green’ vessels, and that is seeing more demand with the adoption of green fuel-based vessels. 

Scaling up

The company is also expanding its market in the ship repair segment and has entered into a Master Shipyard Repair Agreement (MSRA) with the US Navy to repair their ships. With the significant deployment of the US naval fleet in the Indo-Pacific region, which goes back to the US for repair and overhaul, this provides a big potential market. 

Cochin Shipyard is investing in its third shipbuilding facility and setting up a new International Ship Repair Facility (ISRF) at a total investment of ₹2,800 crore. The new shipyard can handle more complex ships such as LNG vessels, aircraft carriers, large tankers, etc. The two facilities, expected to be commissioned during the current quarter, have a revenue potential of about ₹5,500 crore, which is 1.4 times its FY24 revenue of ₹3,800 crore. 

Strong execution across both ship building and ship repairing segments helped in Q1. A one-off high-value ship repair order helped it clock Ebitda margin of 23.4% during the quarter, 630 basis points higher over last year. For the full year, blended Ebitda margin is projected to settle at 18-19%. 

The stock has gained over 600% in the last one year amid a sharp increase in profits and higher revenue visibility. The appreciation is much higher than its peers, such as Mazagaon Dock Shipbuilders Ltd, which gained 175%, and Garden Reach Shipbuilders & Engineers Ltd, which rose 250%. 

While Cochin Shipyard’s Ebitda growth was 230% in FY24, the measure for Mazagaon and Garden Reach was 79% and 56%, respectively. Therefore, the revenue augmentation after commissioning of new facilities will be the focus of the Cochin Shipyard stock.