Why Cochin Shipyard Share Price is Rising

Defence and shipping stocks faced significant pressure after the Union Budget in July 2024. Investors were left disappointed as the sectors didn't see any major announcements.

Expensive valuations also added to the sell-off, triggering a downward trajectory for most defence and shipping stocks. Market sentiment was dampened as the absence of strong policies impacted these sectors' growth expectations.

Cochin Shipyard, one of India's leading shipbuilding and maintenance companies, specialises in building vessels for both defence and commercial sectors. It also handles ship repair activities.

The company plays a crucial role in India's maritime industry, contributing to the defence sector by building warships and coast guard vessels, while also serving international clients.

Recently, Cochin Shipyard's share price surprised investors as it rallied 10% on Friday. The unexpected surge has caught the attention of many.

Let's find out what drove this sudden surge in Cochin Shipyard's share price.

#1 FTSE Inclusion

Last week Cochin Shipyard was on the surge as it was included in the FTSE All World Index. FTSE is a global benchmark that tracks the performance of major stocks across the world.

The rebalancing for this index occurred in the final moments of Friday's trading session. This inclusion was a key factor behind the sudden surge in Cochin Shipyard share price.

According to industry experts, this move is expected to lead to inflows of over US$ 30 million (m). As large institutional investors adjust their portfolios to include Cochin Shipyard, the demand for its shares naturally increases, pushing the price higher.

In addition to the FTSE inclusion, the company's shares are set to trade on an ex-dividend basis starting today. Cochin Shipyard had earlier declared a dividend of Rs 2.3 per share, which is an attractive payout for investors.

The anticipation of this dividend also contributed to the rise in its stock price, as investors often buy shares before the ex-dividend date to qualify for the payout.

Over the past year, the company has consistently rewarded its shareholders with dividends, totalling Rs 14.5 per share.

This stable dividend policy has made Cochin Shipyard a desirable stock for income-seeking investors.

The combination of institutional inflows from the FTSE inclusion and the appealing dividend payout has created a strong positive sentiment around the stock, leading to the 10% rally observed on Friday.

The inclusion in a global index signals its growing stature in the international market, while the steady dividend reinforces its commitment to shareholder returns.

However, it is pertinent to note that the company's share price is once again on a downward trajectory. It slipped 3.1% on Monday.

What Next?

As of 30 June 2024 Cochin Shipyard had a strong order book of Rs 22.5 billion (bn), offering clear visibility on its future revenue.

With major defence projects accounting for 70% of its orders, the company is set to benefit from ongoing defence shipbuilding contracts.

Additionally, it has orders for commercial vessels, both domestic and export, contributing 6% and 15% respectively to its total order value. These diverse segments ensure that Cochin Shipyard's revenue stream remains steady across multiple markets.

Looking forward, the company also has ship repair orders worth Rs 1 bn, adding to its long-term growth prospects. It is further expanding through its subsidiaries, with Hooghly Cochin Shipyard Limited and Udupi Cochin Shipyard Limited contributing Rs 2.1 bn to its order book.

This diversification in operations shows its intention to grow beyond its core business and tap into new markets.

The company's future growth will also be supported by its robust shipbuilding order pipeline, estimated at Rs 7.8 bn.

With government and commercial projects in the pipeline, including Rs 6.5 billion worth of export opportunities, Cochin Shipyard is well-positioned for future expansion.

Cochin Shipyard is also involved in green vessels, which make up a substantial portion of its commercial segment. This focus on environmentally friendly ships aligns with the global shift towards sustainability and positions the company as a leader in the green shipping industry.

With project proposals worth Rs 30 bn in the mid-stages, Cochin Shipyard has strong potential to further grow its order book and revenue base in the coming years.

How Cochin Shipyard Share Price has Performed Recently

In the past five days, Cochin Shipyard share price is down 0.8%. In the past month its share price is down 14.2%.

In 2024, so far its share price is up 162.5% and it has surged 263.9% in the last year.

The stock touched its 52-week high of Rs 2,977.1 on 8 July 2024 and a 52-week low of Rs 435.8 on 26 October 2023.

About Cochin Shipyard

Cochin Shipyard is India's first greenfield shipbuilding yard and the only shipyard with a shipbuilding capacity of 110 thousand deadweight tons (DWT) and a repairing capacity of 125 thousand DWT.

It has a wide product portfolio, including tankers, product carriers, bulk carriers, passenger vessels, and air defence ships, through which it serves its reputed clientele.

The company recently also developed India's first indigenous aircraft carrier, Vikrant.

Some of its clients are the Indian Navy, the Indian Coast Guard, the Shipping Corporation of India, and the National Petroleum Construction Company (Abu Dhabi).

For more details, see the Cochin Shipyard company fact sheet and quarterly results.

Happy Investing!

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