Rs 20,000 crore order book, yet SELL call — What’s worrying brokerages about this defence stock?

Shares of Cochin Shipyard Ltd rose on Tuesday after the company said it had been declared L1 in a tender floated by the Ministry of Defence for the construction of five Next Generation Survey Vessels (NGSV) for the Indian Navy. The estimated total order value is around Rs 5,000 crore.

The stock was trading at Rs 1,534.05, up Rs 65.85 or 4.49 per cent from the previous close of Rs 1,468.20. During the session, it touched a high of Rs 1,575 and a low of Rs 1,527.10. The stock opened at Rs 1,550.

In a regulatory filing, the company said it was declared L1 at a meeting held at the Ministry of Defence in New Delhi. It said the final award of the contract will be subject to satisfactory completion of necessary formalities.

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Q3 Profit Falls Despite Higher Revenue

The development comes at a time when the company reported a decline in quarterly profit despite higher revenue.

Cochin Shipyard reported an 18.3 per cent fall in consolidated net profit to Rs 144.67 crore in the third quarter of FY26 as against Rs 177.03 crore in the corresponding quarter last year. Revenue from operations rose 17.7 per cent to Rs 1,350.41 crore in Q3 FY26 from Rs 1,147.21 crore in Q3 FY25.

Profit before tax declined 18.6 per cent year-on-year to Rs 196.78 crore from Rs 241.86 crore. Total expenses increased 28.52 per cent to Rs 1,224.77 crore during the quarter.

Cost Pressures Weigh on Margins

The cost of materials consumed stood at Rs 596.80 crore, up 16.31 per cent year-on-year. Employee benefits expenses rose 19.54 per cent to Rs 123.32 crore during the period under review.

On the segmental front, revenue from shipbuilding rose 56.49 per cent to Rs 1,013.12 crore during the quarter compared with the year-ago period. However, revenue from the ship repair segment declined 32.57 per cent to Rs 337.29 crore.

Brokerage Maintains Sell Call

In a recent report, brokerage firm Antique Stock Broking maintained a sell rating on the stock and kept its target price unchanged at Rs 1,471. The brokerage said revenue growth during the quarter was led by the shipbuilding segment, while margins were impacted by lower contribution from the higher-margin ship repair business.

It said EBITDA margin declined 687 basis points year-on-year to 13.8 per cent, while gross margin fell 129 basis points to 34 per cent.

Order Book and Valuation Concerns

According to the brokerage, the company’s order book of around Rs 20,000 crore has remained largely flat since FY22. It also flagged muted near-term order visibility due to the deferral of the proposed Indian Aircraft Carrier-II project.

The brokerage said that despite long-term structural opportunities in commercial shipbuilding, valuations remain elevated at around 38 times FY28 estimated earnings. “Despite long-term structural opportunities in commercial shipbuilding, valuations remain stretched at around 38 times FY28 estimated earnings,” the brokerage said.

Cochin Shipyard Limited (CSL) is a miniratna company under the Ministry of Ports, Shipping, and Waterways.