“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.”