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Shipbuilding Gains Momentum; Repair Weakness Weighs on Profits

Cochin Shipyard delivered a mixed Q1FY27 performance below our expectation, with revenue from operations rising 2.4% YoY to INR 10,942 Mn, while EBITDA/PAT declined 12.3%/19.4% YoY. The key drag was the sharp adverse mix, with shipbuilding revenue growing 59.5% YoY to INR 7,000 Mn, while high-margin ship-repair revenue fell 37.4% YoY to INR 3,941 Mn.

We believe the strong shipbuilding ramp-up is the key positive from the quarter, as the segment's revenue increased sharply while profitability remained intact. With an order book of ~INR 190 Bn (3.8x of FY26 revenue) and the increasing contribution from commercial shipbuilding should support better execution visibility and diversify the revenue mix beyond naval programmes. However, the near-term earnings trajectory will remain sensitive to the recovery in shiprepair activity, given its significantly higher profitability.

We maintain a constructive view on the medium-term growth outlook, although margin recovery is likely to be gradual. Key monitorables remain the recovery in ship repair, faster conversion of the shipbuilding backlog and resolution of the long-pending A&N vessels. We maintain our positive stance on COCHIN, underpinned by its robust longterm growth visibility, supported by a strong order pipeline. We maintain our ‘ADD’ rating with a target price of INR 1,565, valuing it at 35x of FY28E EPS

Revenue Misses Estimate; EBITDA and PAT Decline YoY/QoQ

* Revenue for Q1FY27 was up 2.4% YoY but down 26.3% QoQ at INR 10,942 Mn (vs CIE est. of INR 12,075 Mn)

* EBITDA stood at INR 1,932 Mn, down 20.0% YoY and 37.6% QoQ (vs CIE est. of INR 2,731 Mn), 29. EBITDA margin stood at 17.7% (vs CIE est. of 22.6%), contracting by 493 bps YoY and 321 bps QoQ

* PAT declined 19.4% YoY and 45.2% QoQ to INR 1,515 Mn (vs CIE est. of INR 2,001 Mn). PAT margin stood at 13.8%, contracting by 374 bps YoY and 479 bps QoQ (vs CIE est. of 16.6%)

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