Analysts say, the strong response to Cochin Shipyard's IPO was due to its attractive valuation and profit track record. Cochin Shipyard reported a net profit of Rs 312 crore on revenues of Rs. 2,059 crore in FY17. Its revenue and net profit has grown at a CAGR of 11 per cent and 19 per cent over FY2007-FY2017. Meanwhile, its operating margin has expanded from 7.9 per cent in FY2007 to 18.4 per cent in FY2017.
"Considering the past financial performance of CSL (Cochin Shipyard) and strong visibility on future growth, we rate this as SUBSCRIBE," Angel Broking had said in its IPO note. Cochin Shipyard has an order book of Rs. 3,078 crore, which is 1.5 times its FY2017 revenue. Out of the total order book, 80 per cent is from defence sector and 20 per cent is from non-defence sector.
However, analysts say that Cochin Shipyard's high dependence on defence sector and cyclical nature of commercial ship-building is a key risk in the business of Cochin Shipyard.
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