Shipbuilding stocks outshine the Nifty in Calendar 2022

Shipbuilding stocks in focus

by 5paisa Research Team Last Updated: Apr 13, 2022, 03:43 PM IST

In the last few days, shipbuilding stocks have been in the limelight. A typical shipbuilding company caters to the building and maintenance of commercial ships as well as ships for the naval forces of the country. Since the start of 2022, the shipbuilding stocks have actually done a lot better than the overall indices. One can say that the choice is limited but it is a small universe where the attractiveness is surely beginning to show.
 

Company

Price

52-week High

52-week Low

Market Cap

P/E Ratio

ROE

Garden Reach

Rs.299.75

Rs.319.00

Rs.167.65

Rs.3,434 crore

17.85X

16.61%

Mazagon Docks

Rs.317.95

Rs.333.15

Rs.191.70

Rs.6,413 crore

9.88X

21.42%

Cochin Ship

Rs.346.00

Rs.433.75

Rs.281.00

Rs.4,551 crore

8.67X

12.94%

 

Data Source: BSE

Let us take a quick look at the 3 stocks in the shipbuilding space listed in India.

1. Garden Reach has an overall market cap of just about Rs.3,434 crore and is available at an attractive P/E ratio of 17.85 times earnings for its ROE of 16.61%. The stock is trading fairly close to its 52-week high price.

2. Mazagon Docks has an overall market cap of just about Rs.6,413 crore and is available at an attractive P/E ratio of 9.88 times earnings for its ROE of 21.42%. The stock is trading fairly close to its 52-week high price.

3. Cochin Shipyards has an overall market cap of just about Rs.4,551 crore and is available at an attractive P/E ratio of 8.67 times earnings for its ROE of 12.94%.

In all the above cases, the market cap of these companies are very small and the valuations very attractive considering the kind of asset bank and strategic importance that they hold. 


What was the trigger for the spike in prices?


One important trigger for the spike in the stock prices of these ship building stocks was the recent economic crisis in Sri Lanka. As a result, the political and economic uncertainties in Sri Lanka and the resultant congestion at the Colombo port are forcing more ships to turn towards Indian ports in recent months.

This is likely to open up a much larger business opportunity for these shipbuilding and ship maintenance companies in India.

In addition, there has also been diversion of cargo. According to preliminary estimates, up to 10% of the cargo which normally heads for Colombo is heading to Indian ports like Chennai, Ennore, Mundra and VO Chidambaranar Port in Tuticorin.

These ports have been the major beneficiaries. Even Kochi International container Trans-shipment Terminal (ICTT) has seen a 62% spike in traffic. All these are contributing to the sudden interest in shipbuilders.

Many of the shipbuilders are not only commercial shipbuilders but also make specialized warships for the armed forces. With the Make in India program and the commitment to farm out more orders to domestic manufacturers, the defence order flow is also likely to gravitate towards these shipbuilding companies.

Companies like Garden are also making galvanized modular bridges for difficult terrains. The good times may have just begun!

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SENSEX
54,318.47
1,344.63 (2.54%)
Nifty 50
16,259.30
417.00 (2.63%)
Nifty Bank
34,301.90
704.30 (2.10%)

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