Cochin Shipyard stock climbs 5% after securing ₹1,000 crore defence contract
Cochin Shipyard shares climbed 5% to ₹1,656, continuing an upward trend after a ₹1,000 crore contract with the MoD. After experiencing strong selling pressure from August to October 2024, which saw the stock lose 43% of its value, shares resumed their upward trajectory in November.
Shares of Cochin Shipyard, a leading shipbuilding and repair yard in India, continued their upward momentum on Monday, December 2, rising for the seventh consecutive trading session. The stock surged by 5 per cent, reaching ₹1,656 per share, a level not seen since mid-October.
The rally follows the announcement of a significant contract with the Ministry of Defence (MoD), Government of India, for the short refit and dry docking of a large Indian Naval vessel, signed on November 30.
The contract is valued at over ₹1,000 crore, with an estimated project duration of approximately five months, per the exchange filing.
On November 22, 2024, the company entered into a Memorandum of Understanding (MOU) with Seatrium Letourneau USA, Inc (SLET) for the design and critical equipment for jack-up rigs for the Indian market. This collaboration is in line with the government’s efforts under the ‘Make in India’ initiative.
"Building on CSL’s extensive experience in ship construction and engineering and SLET’s renowned technical expertise and design capabilities, this partnership aims to capitalize on opportunities for Mobile Offshore Drilling Units (MODUs) designed to meet the needs of the Indian market," the company said in its regulatory filing.
Shares have risen by 10% in a month
After experiencing strong selling pressure from August to October 2024, which saw the stock lose 43 per cent of its value, shares resumed their upward trajectory in November, gaining 5.35 per cent. From the October close, the stock is now trading with a 10 per cent increase.
The renewed interest in defence stocks comes after they began trading at more attractive levels following a significant correction. This prompted brokerages to issue positive recommendations, citing the sector's appealing valuations, strong order books, favourable government policies, and promising long-term growth prospects.
In addition, the BJP-led Mahayuti alliance's resounding victory in the Maharashtra Assembly elections also brought renewed momentum to defence stocks.
In its recent note, global brokerage firm said that India's defence sector offers a strong runway for structural and value-accretive growth, driven by increasing capital expenditure. Over the next five years, defence spending in India is projected to reach $150 billion, significantly higher than the $85 billion spent in the previous five years.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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