Cochin Shipyard Stock Slides More Than 8% After Company Forecasts Margin Decline Over Next 2 Years

The stock of Cochin Shipyard was down more than 8.5% on September 11 amid a forecast of lower EBITDA margin in the coming two financial years made by the company. 

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The share price of the company hit ₹1,387, the lowest level since August 3. The fall came after a management interaction on Thursday, where the company gave its guidance on the future prospects related to margins, revenue growth, and execution. 

EBITDA Margin Expected at 14% 

Cochin Shipyard expects to see an EBITDA margin of 14% in the next two financial years. This is down from 16.2% in FY26 and represents a margin decline of about 2 percentage points. 

For FY27, the company expects revenues to increase by 12-15% on account of better execution of shipbuilding and ship-repair business. In addition, 10 ships are expected to be delivered in FY27. 

Ship repair business expected to become bigger. In the coming three years, revenues from ship repair are expected to reach around ₹2,500 crore. 

Cochin Shipyard currently has an unexecuted order book of ₹22,000 crore. The company expects 12-15% of revenue to come from the existing order book over the next two years. 

Revenue Grows but Profit Shrinks in First Quarter 

For the June quarter, the numbers of the company showed diverging performance among the two segments. 

Operational revenue grew by 2.4% year-over-year to ₹1,094 crore, however, it decreased by 26.3% sequentially. 

Shipbuilding segment drove the growth. Revenue from the shipbuilding business jumped 59.5% year-over-year to ₹700 crore and contributed 64% of total revenue. Revenue from ship repair dropped by 37.4% to ₹394 crore. 

The EBITDA number decreased 20% year-over-year and 37.6% sequentially to ₹193 crore. EBITDA margin shrunk to 17.7%, down 493 basis points from last year. It happened due to the deteriorating segment mix and decrease in contributions from ship repair. 

Net profit was recorded at ₹152 crore, down 19.4% year-over-year and 45.2% sequentially. 

Also, the company is actively looking for commercial opportunities in shipbuilding sector including repeat orders for dredgers, passenger ships and tankers. The speed of execution in both shipbuilding and ship repair segments will define performance in the coming quarters.