Indian stock market had grown multifold in 2017 led by many supportive events, be it the World Bank upgrade or the government’s massive PSU bank recapitalisation program. The key equity indices, Sensex and Nifty have returned about 25% since January so far. In the year 2017, Indian stock market had witnessed many historic moments, notably, government’s mega plan of Rs 2.11 lakh crore to recapitalise PSU banks, the ranking upgrade in ease of doing business by World Bank, the sovereign credit rating upgrade by Moody’s, etc.
As investors lookout for opportunities remains in place, we bring you a PSU stock that may return more than 30% in 12-18 months and interestingly it got listed in 2017 only. The stock is Cochin Shipyard, it had jumped about 32% from its issue price of Rs 432. The research and brokerage firm HDFC Securities has given target price in a range of Rs 637-745 from a recommendation price of Rs 554, achievable in 12 to 18 months. HDFC Securities has advised to buy at the current market price and add on dips in the range of Rs 508-554.
“As on FY17, shipbuilding constitutes 74% of the top line while ship repair comprises the remaining 26%. We believe strong order book of Rs 8,300 crore, bidding pipeline (~> Rs 10,000 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.,” HDFC Securities said in a report.
Earlier last month, Cochin Shipyard bagged Rs 5,400 crore contract from Indian Navy. “The contract for eight vessels at a cost of about Rs 5,400 crore is expected to be concluded with the Ministry of Defence after due process. The order was bagged against a competitive tender issued by the Ministry of Defence in which both private and public sector yards had participated,” company said in an exchange filing.
Cochin Shipyard, India’s largest public sector shipbuilder, got a bumper response to its IPO with 76 times subscription in August 2017. Cochin Shipyard shares opened for trading today at Rs 461, a modest 6.7% premium to issue price of Rs 432, but soon zoomed to Rs 522, up 21%. The company raised Rs 1,468.11 crore through the issue in which it sold total 33.97 million shares. The government divested 11.32 million shares through an offer for sale while the company issued 22.65 million fresh shares, that should ensure the government stake comes down to 75% post-issue.
Cochin Shipyard was incorporated in the year 1972 as a fully owned Government of India company and according to a CRISIL report, it is the largest public sector shipyard in India in terms of dock capacity, as of 31 March 2015. The company commenced ship repair operations in the year 1982 and has undertaken repairs of all types of ships including the up gradation of ships of oil exploration industry.