This post on Cochin Shipyard Ltd IPO tries to bring out consolidated brokerage views opinions, IPO Review / Analysis, Note/ reports and recommendation of brokerages , Analyst, Business New papers, Management views, information on Anchor investors, Subscription etc on Cochin Shipyard Ltd IPO and shall be updated continuously till the closure of the issue. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Cochin Shipyard Ltd IPO or not.
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31/6/17 Grey Market Premium Rs.150-155 , Kostak (Application rate) – Rs. 1100
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Consolidated opinion of Brokerages, Analysts, Business New Paper Reports, Management Views on Cochin Shipyard Ltd IPO .
Angel Broking: “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.”
Reliance Securities:”We admire CSL’s ability to stay afloat in the turbulent period without compromising on margins. Going forward, government’s endeavor to improve its defence strength in sea route and several initiatives under flagship “Make in India” programme will result in healthy orders for CSL, which will drive growth. At the upper price band, CSL trades at 18.8x FY17 EPS post dilution. Though it is difficult to compare it with peers as most of the listed peers are loss making, we believe the current valuations are not expensive given healthy return ratios and bright prospects. Further, price to book ratio after dilution stands at 1.9x, which is attractive in our view. Hence, we recommend SUBSCRIBE to the issue.”
Capital Market:”Score 45/100 : CSL’s revenue grew by 3% to Rs 2059.49 crore for the year ended March 2017. But its operating profit margin declined by 120 bps to 18.5% and thus the operating profit was down by 3% to Rs 380.20 crore. Eventually gained by higher other income and lower interest, the net profit was up by 7% to Rs 311.12 crore. The EPS for FY17 works out to Rs 23.0 on post issue equity. The offer price of Rs 424-432 discounts the FY17 EPS by 18.4 times on lower price band and 18.8 times on upper price band. The listed comparable peer Reliance Defence Engineering has reported a net loss for FY17 and thus its EPS was in negative. “
Prabhudas Lilladher: “ We believe CSL is a good proxy play on the Indian defence sector. Strong net cash balance sheet (Rs18bn at end of FY17), strong order pipeline and option value of bagging further Air craft carriers could provide multiyear visibility of earnings. At the upper end of the issue price the post money market cap works out to be ~58.8bn. At upper end of issue price CSL will trade at 18.8xFY17 earnings. We recommend Subscribe with a Medium/Long term perspective. .”
ICICIDirect: “At the upper band of | 432, the stock is available at 18.2x FY17 EPS of
| 23.7. We have a SUBSCRIBE recommendation on the offering based on robust order book (~| 3000 crore), strong order inflow visibility, best-inclass execution capabilities and leverage free balance sheet. “
GEPL Capital: “Cochin Shpyard Ltd (CSL) stands to gain from operating leverage. At a P/E of 15.6xs of FY17 EPS. We believe that CSL. demands a discount to its domestic peers. We assign a Subscribe rating to the IPO”
Ashika Direct: ” The company is in the process of developing its Dry Dock and ISRF. Once developed, these new facilities will expand its existing capabilities significantly and help it to build and repair a broader variety of vessels including new generation aircraft carriers and oil rigs, which are expected to be key growth drivers in the short to near long term. The company has generated RoE of more than 15% every year since FY08 and has a track record of healthy dividend payments. Moreover, the company has a strong Core EBITDA Margin of more than 15% from past four years. The company’s competitive cost structure and efficient operations coupled with order book with a strong customer base of reputable ship owners and marquee clients makes the stocks attractive for long term investment.“
Religare: ” The company is likely to be a key beneficiary of the Government’s recent ‘Make in India’ initiative to encourage defence manufacturing in India. The company is cash rich with ~Rs 20bn cash & bank balance in its books as on June 30, 2017. This would further increase by Rs 9.8bn post IPO through fresh issue of shares, which will be utilized for expanding its operations. At the upper price band of Rs. 432 per share, the stock is valued at 18.8x FY17 EPS, which reflects the company’s healthy order backlog, (which improves revenue visibility), strong execution capabilities and low leveraged balance sheet (D/E stood at 0.06x in FY17).“
SMC : “Rating 3/5 On the lower end of the price band of Rs.424 the stock is priced at pre issue P/E of 15.39x on its FY17 EPS of Rs. 27.56.Post issue, the stock is priced at a P/E of 18.35x on its EPS of Rs. 23.11. Looking at the P/B ratio at Rs. 424, the stock is priced at P/B ratio of 2.36 x on the pre issue book value of Rs. 179.29 and on the post issue book value of Rs. 222.09 , the P/B comes out to 1.91x. Cochin Shipyard Limited is well-positioned to benefit from the recent ‘Make in India’ initiative
pursuant to which the GoI is keen to encourage defence manufacturing in India.”
SP Tulsiyan website: “Healthy order book, cash surplus balance sheet position, healthy margins and consistent financial performance are key positives for the issue. Enterprise value of Rs. 4,000 crore is making the pricing very attractive, which may invoke huge investor participation. Rs. 21 discount for retail investors is an added sweetener. IPO of Cochin Shipyard is a safe and sound bet, capable to deliver steady returns, making it a subscribe.”