1 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Recommendation

Buy at CMP and add on Dips

Add on dips to

Rs. 508-554

Targets

Rs. 637-745

Time Horizon

4 - 6 Quarters

Industry

Shipping / Defence

CMP

Rs. 554

Company Background

Cochin Shipyard, a public sector enterprise, is focused on providing shipbuilding and ship repair work in the defence

sector in India and also clients engaged in the commercial sector. In addition to shipbuilding and ship repair,

company offers marine engineering training. The Company’s docks include ship repair dock and shipbuilding dock.

Ship repair dock enables to accommodate vessels with a maximum capacity of 125,000 DWT (Dead Weight

Tonnage). In addition, ship repair dock offers a flexible range of products such as, tankers, product carriers, bulk

carriers, passenger vessels and air defence ship. Shipbuilding dock can accommodate vessels with a maximum

capacity of 110,000 DWT. The Company has built a variety of vessels ranging from bulk carriers, tankers and

passengers ships to offshore support vessels and port crafts. It is also the only shipyard in the country which can

fix vessels of up to 1,25,000 DWT, besides being the only yard that can repair an air defence ship. Company had

come out with an IPO in Jul 2017. The IPO was made at Rs 432 and raised Rs 1450cr (fresh issue of Rs 950cr and

offer for sale of Rs 488cr). The money would be used in the proposed expansion plans over the next three years.

Investment Highlights

Cochin Shipyard (Cochin) is one of the largest companies in the Indian shipbuilding and ship repair sector.

Over the years, the company has emerged as a premier player in the Indian shipbuilding segment with expertise

in design, engineering and project implementation.

Cochin is also a market leader in the Indian ship repair segment with market share of ~39% and has undertaken

repairs of most complex ships of the country.

As on FY17, shipbuilding constitutes 74% of the topline while ship repair comprises the remaining 26%. We believe

strong order book (Rs 8300cr), bidding pipeline (~> Rs 10000 crore), core competency in both shipbuilding & ship

repair (especially defence), debt-free status, best-in-class working capital cycle, reliability in execution and being

a natural beneficiary of large & critical government projects places Cochin Shipyard in a sweet spot.

Cochin is a good proxy play on the Indian defence sector. Strong net cash balance (~Rs 2700cr at end of H1 FY18),

strong order pipeline and order of Air craft carriers could provide multiyear visibility of earnings.

Kushal Rughani

kushal.rughani@hdfcsec.com

HDFC Scrip Code COCSHI

BSE Code 540678

NSE Code COCHINSHIP

Bloomberg COCHIN

CMP as on 17 Nov-17 554

Equity Capital (Rs cr) 135.9

Face Value (Rs) 10

Equity O/S (cr) 13.59

Market Cap (Rs Cr) 7530

Book Value (Rs) 231

Avg. 52 Week Vol 222913

52 Week High (Rs) 597

52 Week Low (Rs) 435

Shareholding Pattern (%)

Promoters 75.00

Institutions 13.70

Non Institutions 11.30

PCG Risk Rating*

Yellow

* Refer Rating explanation

2 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Better business mix, strong revenue visibility and healthy Balance sheet

Cochin Shipyard is consciously improving its business mix by increasing the share of ship-repairs orders

(~2x profitable than shipbuilding business) in its order book. Better business mix coupled with strong

bidding pipeline of over ~Rs 11,000 crore augur well for the company. It is also likely to receive order

for phase III of IAC, which is likely to be ~Rs 10,300 crore. Even during turbulent times in the global

shipbuilding history, it has delivered revenue and PAT cagr of 11% and ~19% respectively over FY07-

17. After IPO in Jul 2017, company has cash & equivalents of Rs ~2700cr, currently which works out to

~34% of the market cap or Rs 198 per share. With capex of Rs 2,800 crore over the next three years

(FY18-21E) and superior return profile (RoE/RoCE of ~15% in FY12-17), we believe Cochin Shipyard is

a quality play in the shipping/defence segment.

Business Portfolio of the company

Shipbuilding:

Cochin is one of India's leading public‐sector shipyards catering to both commercial clients as well as

clients engaged in the defence sector with a multitude of offerings for a broad range of vessels across

life cycles. They are the largest shipyard in India in terms of dock capacity catering to Defence and

commercial orders. Shipbuilding in the defence sector is complex and time consuming, whereas

commercial shipbuilding, while relatively less complex, is subject to business cycles. They are currently

building India's first Indigenous Aircraft Carrier (IAC) for the Indian Navy and have also built two of

India’s largest double hull oil tankers, each of 92,000 DWT for Shipping Corporation of India.

Ship Repair:

In addition to Ship building, they also undertake ship repairs where the scope of work varies from normal

wear and tear to complex repairs. They have repaired about 15 Indian Naval Ships. They also recently

completed refits of INS Aditya, INS Sukanya, INS Shardul, INS Viraat and INS Vikramaditya for the

Indian Navy and have undertaken major revamping and refurbishing of oil rigs involving steel renewal,

up‐gradation of drilling, cementing, mechanical, HVAC and piping systems in almost all the major offshore

vessels and rigs of ONGC.

Competition: Key competitors in Defence Shipbuilding include Mazagon Dock Shipbuilders, Goa Shipyard,

Garden Reach Shipbuilders and Engineering, L&T Shipyard, Reliance Defence and Engineering and in

Commercial Shipbuilding are Reliance Defence and Engineering and L&T Shipyard. They also face

competition from global players like Colombo Dockyard, Dubai dry dock, Arab ship repair yard and

Keppel, Singapore.

Key Highlights

Over the years, Cochin has emerged as a premier player in the Indian shipbuilding segment with expertise in design, engineering and project implementation. Cochin is also a market leader in the Indian ship repair segment with market

share of ~39%. It derives ~74% revenue from ship building and ~26% from ship repair. We believe strong order book (Rs 8300cr) provides revenue visibility of next 36-48 months, bidding pipeline (~> Rs 10000 crore), core competency in both shipbuilding & ship repair (especially defence), debt-free status, best-in-class working capital cycle, reliability in execution and being a natural beneficiary of large & critical government projects place Cochin Shipyard in a sweet spot. Cochin had raised Rs 950cr via fresh issue from IPO. The money would be used in the proposed expansion plans over the next three years which augurs well for the company. Strong net cash balance (Rs 2700cr at end of H1 FY18) (cash per share of Rs 193), strong order pipeline and option value of bagging further Air craft carriers could provide multiyear visibility of earnings.

3 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Make in India campaign in defence to throw open domestic opportunities

India was the fifth largest spender in defence globally in 2016 as its military expenditure grew 8.5% yoy to US$ 53bn. Capital Budget is

going to increase as government is focused on upgrading its capability and focus more on equipment. Moreover, Government is more

committed to its make in India strategy. This would increase opportunities for domestic shipyards like Cochin Shipyard.

In Oct 2017, Cochin Shipyard has formed JV with Hooghly Dock & Port for upgradation and modernisation of shipbuilding infrastructure in

Kolkata. Cochin has plans to build Rs 100cr facility on the Hooghly in Kolkata for construction of vessels for inland water transport.

Recently, company bagged large order worth Rs 5400cr for eight vessels from Indian Navy. In this tender, both private and public sector

companies had participated. With this orders in hand surged to Rs 8300cr for the company.

Source: Company, HDFC sec Research

4 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Ship Repair Segment

Cochin began its ship repair operations in year 1981 and has undertaken repairs of various types of vessels including upgradation of ships

of the oil exploration industry as well as periodical maintenance, repairs and life extension of ships. Cochin’s shipyard has developed

capabilities to handle various repair jobs over the last several years. For the ship repair jobs, company has entered into MoUs with various

clients including the Lakshadweep Development Corporation (LDCL), Directorate General of Lighthouses and Lightships (DGLL) and

Dredging Corporation of India (DCI) on a bulk volume basis.

Its key ship repair clients include the Indian Navy, the Indian Coast Guard, SCI, Oil & Natural Gas Corporation (ONGC) and DCI. Company

has also partnered with Techcross Inc. for technical support, engineering, service support and sharing of information in relation to the

Ballast Water Treatment System (BWTS) products.

Company said in a release that, it would make Kochi as global ship repair hub. Company has started the work on its Rs 970cr International

Ship Repair Facility (ISRF) project on Nov 17, 2017. On completion of two years, Kochi will be a major ship repair hub in India and would

add around 1500 additional employment.

ISRF is project approved by the Government of India (GOI) in May 2016. Cochin will set up ship lift system of size 130m x 25m with lifting

capacity of 6000 Tons and 6 workstations. The facility can repair up to 85 vessels, and CSL will thereby be almost doubling the number of

ships that can be repaired per year.

Cochin is in the process of adding one more ship repair facility, international ship repairing facility (ISRF), which will enable it to undertake

repairs of vessels like LNG carriers, semi-submersibles, jack up rigs, and drill ships. Full commissioning of the international ship repairing

facility is likely to enable the company to increase its ship repair capability by 70-90 ships per annum. It currently repairs 80-100 vessels

per annum. The completion of the international ship repair facility (ISRF) is likely in 2020.

One of the largest players in Ship Repair business

Cochin Shipyard is also in the process of constructing a new dock, a ‘stepped’ dry dock. This stepped dock will enable the company to build

rigs and vessels of a larger size. It is also in the process of setting up an international ship repair facility (ISRF), which includes setting up

a ship-lift and transfer system. In the last two decades, it has built and delivered vessels across broad classifications including bulk carriers,

tankers, platform supply vessels (PSVs), barges, bollard pull tugs, passenger vessels and fast patrol vessels (FPVs). Cochin is also currently

building India's first indigenous aircraft carrier (IAC) for the Indian Navy. The company has also grown its ship repair operations and is

the only commercial shipyard to have undertaken repair work of the Indian Navy's aircraft carriers, the INS Viraat and INS Vikramaditya.

Cochin Shipyard has delivered two of India’s largest double hull oil tankers, each of 92,000 DWT to Shipping Corporation of India (SCI).

The company has evolved from building bulk carriers to building smaller and more technically sophisticated vessels such as PSVs and

AHTSs. It has also worked with several leading technology firms in this segment like Rolls Royce Marine (Norway), and Gaztransport &

Technigaz (GTT) SA. Company’s key shipbuilding clients include the Indian Navy, the Indian Coast Guard and SCI. Company has also

exported 45 ships to various commercial clients outside India like NPCC-Abu Dhabi, the Clipper Group (Bahamas), Vroon Offshore

(Netherlands).

5 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Expanding capacity to meet growing needs

Cochin currently has two docks – dock number one, primarily used for ship repair (Ship Repair Dock) and dock number two, primarily used

for shipbuilding (Shipbuilding Dock). The Ship Repair Dock is one of the largest in India and is capable of accommodating vessels with

maximum capacity of 1,25,000 DWT. The shipbuilding Dock can accommodate vessels with maximum capacity of 1,10,000 DWT (Dead

Weight Tonnage). Company has raised Rs 980cr through fresh issue of shares leading to 17% dilution. The money would be used to build

third dry-dock and an international ship-repair center which would cater to the future shipbuilding and ship-repair demand.

Strong Outlook from all the segments

Defence segment – Cochin Shipyard is one of the yards empanelled with the Indian Navy for order flow from the Navy & Coast Guard.

With the defence budget of the Navy on an increasing trend, we believe that the Navy and coast guard would continue to be a regular

source of orders for the company.

Commercial segment - The shipbuilding industry is linked to the growth of the shipping companies’ fortunes, which in turn depends on

global economic growth and World trade. With the upturn in trade and a subsequent improvement in freight prices across all categories,

the performance of the shipping industry is expected to improve, which augurs well for the shipbuilding companies like Cochin for orders

from the commercial segment.

Ship-repair – Ship-repair is a high margin business with high capital turnover ratio. Management of the company indicated that the

company was not able to accept many orders in this segment due to severe capacity constraints. The upcoming international ship-repair

center is expected to fill this gap and give a fillip to operating margins and return ratios of the company going forward.

Cochin Shipyard’s clientele

In its core area of expertise i.e. shipbuilding, the company has built a variety of vessels ranging from bulk carriers, tankers and passengers

ships to offshore support vessels and port craft. The company’s Indian clients include the Indian Navy, the Indian Coast Guard, SCI, ONGC,

DGLL, DCI, etc, while foreign clients include NPCC, the Clipper Group, Vroon and Sigba AS.

In the ship repair segment, Ithas developed adequate capabilities to handle complex and sophisticated repair jobs. The company has also

entered into special MoU arrangements to enhance its ship repair business. Cochin repaired LDCL and DCI vessels under such MoUs

arrangements. In FY16, major repair works for commercial clients included work on the GTV SamudraSarvekshak and the WSV

SamudraNidhi for SCI, and on the Dredge VIII and Dredge XIX for the DCI and MV Kavaratti for LDCL. In FY17, the docks were running

at almost full capacity due to which it had to turn away new requests.

In addition to the existing order book, Cochin has also bid for a tender from the Home Ministry worth ~Rs 1000 crore. These tenders are

mostly likely to be opened over the next year. The company expects healthy inflows to its order book from the same.

6 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

H1 FY18 Results Highlights

During H1 FY18, Revenue increased 19% to Rs 1139cr led by ~70% growth from ship repair segment while shipbuilding grew ~5%.

Operating margin saw sharp dip of 650 bps yoy to 18.3% on the back of lower margin in repair business. Higher other income led to flat

PAT of Rs 191cr yoy. Other Income increased 32% yoy to Rs 104cr. After IPO in Jul 2017, company has cash & equivalents of Rs ~2700cr

while debt on books at Rs 123cr.

Set to meet future needs

Cochin Shipyard (Cochin) is a public sector shipyard with an order book of ~Rs.83 bn providing strong revenue visibility. The current

order-book comprises orders from the commercial segment, navy, coast guard and ship-repair segment. The company is also ramping up

its capacity with third dry-dock and an international ship-repair center. We are positive on the company for 1) Recurring orders from Navy

and Coast guard and 2) Improvement in the prospects of commercial shipbuilding segment. High margin ship-repairs business is value

additive for the company. Expect prospects to improve for the company going forward especially with the Make in India initiative of GOI.

View & Valuation

We expect ship repair revenues to grow at ~11% CAGR over FY17-20E. Currently, Cochin repairs ~80-100 vessels per year. By efficient

docking of vessels i.e. size of vessels vs. dimensions of the dockyard, the company plans to increase its revenue in the coming years. The

company also boasts of creating best-in-class ecosystem in this segment. This is primarily due its material procurement systems wherein

it can source the required materials in the shortest possible time. Cochin has also developed strong contactor-vendor systems, with

capabilities complimentary to that of its shipyard, helping speedy execution of contracts. As per the management, public sector shipyards

like Mazgaon Docks and Goa Shipyard have benchmarked Cochin Shipyard for improving their ecosystems.

We expect revenues to increase at 16% cagr over FY17-20E, mainly on the back of accelerated growth in the shipbuilding segment. Over

FY13-17, Cochin registered muted revenue CAGR of 7.3% on the back of growing higher share of revenues in the ship repair segment.

Contribution to revenue from the ship repair segment increased from 13.8% in FY14 to 26.4% in FY17. Accordingly, revenues from the

ship repair segment grew 17.4% CAGR in FY13-17 while it grew just 4.5% during the same period in the shipbuilding segment.

EBITDA to witness ~12% CAGR in FY17-20E; margins to remain stable

The operating EBITDA grew at 13.2% CAGR over FY13-17. This was despite subdued growth of 7.9% in revenue over the same period.

This was mainly due to accelerated growth of 17.4% in the ship repair segment. Ship repair business, depending on the vessel mix, can

earn EBITDA margins up to ~40%. The shipbuilding segment, on the other hand, earns 8-15% EBITDA margins. Higher growth in the ship

repair segment helped company to post better margins of 18.5% in FY17 vs. 14.8% in FY13.

Going forward, we expect margin to remain stable at 18-19% primarily due to increasing contribution of the shipbuilding segment. We

expect the shipbuilding segment to grow at 17% CAGR over FY17-20E and to contribute 76% to the total topline by FY20E. We have taken

14.5% increase in employee expenses in FY17-20E which would weigh on margins. We expect absolute EBITDA to grow at 17% CAGR in

FY17-20E vs. 13.4% in FY13-17.

7 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Cochin has posted net profit cagr of 14.9% in FY13-17. Other income grew at ~17% cagr during the same period. Higher interest income

was due to growing cash balance on the books of the company. Cash balance had surged from Rs 573 crore in FY14 to Rs 1931 crore in

FY17. After IPO in Jul 2017, company has cash & equivalents of Rs ~2700cr, currently which works out to ~34% of the market cap or Rs

198 per share. We expect this trend to reverse on account of large capital expenditure in the next three years. A reducing cash balance

scenario coupled with declining interest rate is likely to result in lower other income and consequently PAT growth of the company. We

expect PAT to see 14% CAGR over FY17-20E. At CMP of Rs 554, the stock trades at ~16x FY20E EPS which is attractive given robust

balance sheet, strong return ratios and sustainable revenue visibility. We recommend BUY on Cochin at Rs 554 and add on dips to Rs 508

with sequential TP of Rs 637 and Rs 745 over the next 4-6 quarters.

Risks and Concerns

Delay in planned large Capital Expenditure and execution of large orders

Fall in Crude oil price could impact the E&P capex cycle and result in reduced demand for offshore vessels.

Delay in payment from ship-owners leading to higher working capital requirement.

Reduced allocation to navy from the defence pie

Financial Snapshot

(Rs Cr) FY15 FY16 FY17 FY18E^ FY19E FY20E

Sales 1859 1993 2059 2341 2687 3232

EBITDA 423 468 543 602 661 765

Net Profit 235 272 323 369 417 469

EPS (Rs) 20.7 24.1 28.4 27.2 30.7 34.5

P/E 26.7 22.9 19.4 20.4 18.0 16.0

EV/EBITDA 17.6 16.4 15.3 13.7 11.8 9.6

Source: Company, HDFC sec Research, ^ post IPO

8 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Revenues to witness strong ~16% cagr over FY17-20E

Source: Company, HDFC sec Research

1859 1993 2059 2341 2687 3232

12.5

7.2

3.3

13.7

14.8

20.3

0

5

10

15

20

25

0

500

1000

1500

2000

2500

3000

3500

FY15 FY16 FY17 FY18E FY19E FY20E

Total Income Growth %

EBITDA trend over FY17-20E

Source: Company, HDFC sec Research

330 354 381 425 493 607

26.3

7.47.5

11.4

16.1

23.2

0

5

10

15

20

25

30

0

100

200

300

400

500

600

700

FY15 FY16 FY17 FY18E FY19E FY20E

EBITDA EBITDA Growth

EBITDA Margin (%)

Source: Company, HDFC sec Research

15.8

17.7 17.8

18.518.1

18.318.8

FY14 FY15 FY16 FY17 FY18E FY19E FY20E

Return Ratios (%)

Source: Company, HDFC sec Research

16.1 16.2 16.7

14.312.7 13.1

22.2 21.923.2

16.7 16.4 17.0

0.0

5.0

10.0

15.0

20.0

25.0

FY15 FY16 FY17 FY18E FY19E FY20E

RoE RoCE

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Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Ship Repair Industry to see ~9% cagr

Source: Company, HDFC sec Research

0

200

400

600

800

1000

1200

1400

1600

1800

FY16 FY21E

Key Players in Ship Repair (Market share %)

Source: Company, HDFC sec Research

9 9

20

39

0

5

10

15

20

25

30

35

40

45

HindustanShipyard

L&T Goa Shipyard Cochin Ship

Ship Repair Revenues

Source: Company, HDFC sec Research

0

100

200

300

400

500

600

700

800

FY14 FY15 FY16 FY17 FY18E FY19E FY20E

Revenue Mix (%)

Source: Company, HDFC sec Research

75.8

23.6

0.6

Shipyard

Repair

Others

10 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Income Statement (Consolidated)

(Rs Cr) FY15 FY16 FY17 FY18E^ FY19E FY20E

Net Revenue 1859 1993 2059 2341 2687 3232

Other Income 93 114 164 177 168 157

Total Income 1952 2107 2223 2518 2855 3390

Growth (%) 12.5 7.2 3.3 13.7 14.8 20.3

Operating Expenses 1529 1639 1680 1917 2195 2625

EBITDA 423 468 543 602 661 765

Growth (%) 26.3 7.4 7.5 11.4 16.1 23.2

EBITDA Margin (%) 17.7 17.8 18.5 18.1 18.3 18.8

Depreciation 38 37 39 45 62 80

EBIT 385 431 505 557 599 685

Interest expenses 18 12 11 14 15 19

PBT 367 419 495 542 582 664

Tax 132 147 172 168 169 193

RPAT 235 272 323 369 417 469

Growth (%) 20.9 16.4 18.2 15.9 10.7 14.1

EPS 20.7 24.1 28.4 27.2 30.7 34.5 Source: Company, HDFC sec Research, ^ post IPO

Balance Sheet

As at March FY15 FY16 FY17 FY18E^ FY19E FY20E

SOURCE OF FUNDS

Share Capital 113.2 113.2 113.2 135.9 135.9 135.9

Reserves 1449 1701 1918 3005 3277 3585

Shareholders' Funds 1562 1814 2031 3141 3413 3721

Long Term Debt 123 123 123 159 194 254

Long Term Provisions & Others 22 22 24 26 36 51

Total Source of Funds 1733 1974 2178 3326 3642 4026

APPLICATION OF FUNDS

Net Block (incl CWIP) 391 395 410 746 1223 1634

Deferred Tax Assets (net) 43 60 60 60 60 60

Long Term Loans & Advances 11 176 26 38 56 97

Total Non Current Assets 445 631 496 844 1339 1790

Inventories 303 232 187 263 317 416

Trade Receivables 611 482 307 398 471 549

Short term Loans & Advances 1 1 1 3 12 27

Cash & Equivalents 1420 1820 1991 2736 2509 2357

Other Current Assets 81 180 320 349 398 433

Total Current Assets 2415 2715 2806 3749 3706 3783

Trade Payables 172 210 161 196 232 261

Other Current Liab & Provisions 759 936 767 851 919 1002

Short-Term Provisions 225 224 211 234 267 299

Total Current Liabilities 1156 1370 1139 1281 1418 1562

Net Current Assets 1259 1345 1667 2467 2288 2220

Total Application of Funds 1733 1974 2178 3326 3642 4027 Source: Company, HDFC sec Research, ^ post IPO

11 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Cash Flow Statement

(Rs Cr) FY15 FY16 FY17 FY18E^ FY19E FY20E

Reported PBT 367 419 495 543 584 666

Non-operating & EO items -93 -114 -164 -177 -168 -157

Interest Expenses 18 12 11 14 15 19

Depreciation 38 37 39 45 62 80

Working Capital Change 611 315 -151 -55 -49 -84

Tax Paid -132 -147 -172 -168 -169 -193

OPERATING CASH FLOW ( a ) 809 523 58 201 275 330

Capex -107 -29 -54 -380 -540 -490

Free Cash Flow 702 494 4 -179 -265 -160

Investments 25 -182 150 -12 -18 -41

Non-operating income 93 114 164 177 168 157

INVESTING CASH FLOW ( b ) 11 -97 260 -215 -390 -373

Debt Issuance / (Repaid) 45 -11 -13 38 45 75

Interest Expenses -18 -12 -11 -14 -15 -19

FCFE 729 470 -20 -155 -235 -104

Share Capital Issuance 0 0 0 23 0 0

Dividend -20 -20 -102 -130 -142 -165

FINANCING CASH FLOW ( c ) 7 -43 -126 -84 -113 -109

NET CASH FLOW (a+b+c) 827 382 192 -98 -227 -152 Source: Company, HDFC sec Research, ^ post IPO

Key Ratios

(Rs Cr) FY15 FY16 FY17 FY18E^ FY19E FY20E

EBITDA Margin 17.7 17.8 18.5 18.1 18.3 18.8

EBIT Margin 20.7 21.6 24.6 23.8 22.3 21.2

APAT Margin 12.6 13.7 15.7 16.0 15.4 14.6

RoE 16.1 16.2 16.7 14.3 12.7 13.1

RoCE 22.2 21.9 23.2 16.7 16.4 17.0

Solvency Ratio

D/E 0.1 0.1 0.1 0.1 0.1 0.1

Net D/E -0.8 -0.9 -0.9 -0.8 -0.7 -0.6

PER SHARE DATA

EPS 20.7 24.1 28.4 27.2 30.7 34.5

CEPS 24.1 27.4 31.8 30.4 35.3 40.4

BV 138 160 179 231 251 274

Dividend 1.5 1.5 7.5 8.3 9.0 10.5

Turnover Ratios (days)

Debtor days 120 88 54 62 64 62

Inventory days 69 49 37 41 43 47

Creditors days 54 63 51 55 57 55

VALUATION

P/E 26.7 22.9 19.4 20.4 18.0 16.0

P/BV 4.0 3.5 3.1 2.4 2.2 2.0

EV/EBITDA 17.6 16.4 15.3 13.7 11.8 9.6

EV / Revenues 3.1 2.9 2.8 2.5 2.2 1.8

Dividend Payout 7.2 6.2 26.4 30.6 29.3 30.4 Source: Company, HDFC sec Research, ^ post IPO

12 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Rating Chart

R E T U R N

HIGH

MEDIUM

LOW

LOW MEDIUM HIGH

RISK

Ratings Explanation:

RATING Risk - Return BEAR CASE BASE CASE BULL CASE

BLUE LOW RISK - LOW RETURN STOCKS

IF RISKS MANIFEST PRICE CAN FALL 20% OR MORE

IF RISKS MANIFEST PRICE CAN FALL 15%

& IF INVESTMENT RATIONALE

FRUCTFIES PRICE CAN RISE BY 15%

IF INVESTMENT RATIONALE

FRUCTFIES PRICE CAN RISE BY 20% OR

MORE

YELLOW MEDIUM RISK - HIGH RETURN STOCKS

IF RISKS MANIFEST PRICE CAN FALL 35% OR MORE

IF RISKS MANIFEST PRICE CAN FALL 20%

& IF INVESTMENT RATIONALE

FRUCTFIES PRICE CAN RISE BY 30%

IF INVESTMENT RATIONALE

FRUCTFIES PRICE CAN RISE BY 35% OR

MORE

RED HIGH RISK - HIGH RETURN STOCKS

IF RISKS MANIFEST PRICE CAN FALL 50% OR MORE

IF RISKS MANIFEST PRICE CAN FALL 30%

& IF INVESTMENT RATIONALE

FRUCTFIES PRICE CAN RISE BY 30%

IF INVESTMENT RATIONALE

FRUCTFIES PRICE CAN RISE BY 50%

OR MORE

13 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

Price Chart

50

150

250

350

450

550

650

Rating Definition:

Buy: Stock is expected to gain by 10% or more in the next 1 Year. Sell: Stock is expected to decline by 10% or more in the next 1 Year.

14 | P a g e

Cochin Shipyard

Systems

INVESTMENT IDEA

Nov 20, 2017

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