Hi,
Am new to this. Trying to learn .
Am unclear about the contingent liabilities of 3354Cr. ?
anyone can shed idea on what this is?
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I am not sure if this answers your question⌠From the Transcript of Earnings call Q2 & H1 FY21
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Major portion of the contingent liability is BG 2700 crs and LC 133.
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do Cochin Shipyard have escalation costs with their customers?
With steel prices rising, input costs rise which means customer advances might not cover the entire cost of construction. Will Cochin have to put up the differential from their own pocket?
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This was discussed in last call. Excerpt from transcription
âIndividual investor: Sir, my question is steel prices are up around 30%-odd in Q2. So, how would it impact margins of fixed price contract in ship building side moving forward?
Rajesh Gopalakrishnan: Right now, as we speak, I think for the orders that we already have in hand, procurement of steel has already been done. So, we do not expect an immediate impact. This we will have to see as we move and as we take the next order, we need to price it accordingly. Since we procure
it directly from the mill, we normally do it in bulk.â
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Cochin shipyard net profit is 600 crore . It trades around 9 p/e . Opm is 26% and npm is 20% . Roce has been in 20% + over last 5 years and roe also around 16% . Why doesnât it get re-rated or why does it get these kind of valuations, any specific reason?
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PSU
Actually I want to answer it in one word. I hope at some point market will rerate all the good PSUs. Its in my watchlist for very long time.
Cochin Shipyard Investor Presentation
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Initiating a tracking position on account of
Dominant industry position
Capex finishing leading to significant operating leverage
Prudent and competent mgmt
Attractive valuation
Strong order book and tailwinds
Senior members pls highlight issues/ concerns to be evaluated and monitored in the counter.
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The ratios which you have mentioned looks correct from an apparent view but that doesnât give a perfect picture with whatâs happening with the business.
So letâs have a look at its business.
For FY 2020-21 company has generated net profit of Rs 609 crores (approx). Again if we look at the cash generated from the operations for the year it is Rs. 749 crores (approx). Now letâs look at how much capital has been employed in the business to generate Rs 749 crores of cash flow? So if we break the networth of Rs 3978 crores almost a sum of Rs 2146 crores is lying as cash and cash equivalents. WoW! If you see remaining 1832 crores of networth about 1061 crores is work in progress ( Their current expansion plans) and the rest more or less about 750 crores odd is lying in the fixed assets. This raises the question about their working capital cycle. How are they funded? Whether they have taken any borrowings? Ans is No. So they have a Negative or one can say as Nil investment in working capital.
So lets draw conclusion from the above analysis. Company is earning cashflow of Rs 749 crores from Rs 750 crores employed in the core business. Amazing! Thatâs about 100% ROCE or ROE (Both are same as there is an immaterial borrowings) Am I looking at something alike of Nestles or unilevers of the world?
So now whatâs the fun here mostly all the capex of the company will come live by FY 2022-2023. More than 40% portion also coming live from current FY subject to pandemic. Also many more interesting things are happening if one look at the management commentary in terms of getting new businesses. They are entering into building dredgers (which will be happening for the first time in India for some really big dredgers), they are also looking for bidding in the foreign countries (Management did not bid till date as they were running out of the capacity and these projects were to be met on short period of time compared to contracts of Indian Navy.) Also if we look at the ship repair business there are many interesting things happening in this front too which I will leave for other members to explore.
As far as management is concerned Madhu S Nair is the man. One can look at the past executions of this man. He is a man with the vision. Also if one see how he looks at the different aspects of the company in terms of risk one can understand company is in the safe hands.
So now at what price are we getting this company? Company having Market Cap of Rs 5400 Crores with Rs 2146 Cores lying as cash and cash equivalents leaves about Rs 3200 odd crores for the core business generating Rs 750 Crores of operating cash flows. Hmmm looks good. Again what is the ROCE or ROE? Near to 100%. This brings us to the question what is the moat here? If I answer everything there will be no fun in this post.
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You need to rework your Net Margin calculations. Margins are going to decrease going forward, Management honestly clarified this during Q1 22 Concall
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link for the Q4 FY21 Earnings Conference Call, June 18, 2021 .
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Did anyone attended AGM? It would be really helpful if someone can summarized the AGM.
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Is anyone aware of the âMullaperiyar Damâ threat for Cochin Shipyard? I am not aware about this but saw some comment on Moneycontrol forums. Anyone can shed more light on this or share company annual report where this is mentioned?
Also is the Rs. 10,000 crore order confirmed from Government? This was at L1 stage when company communicated last time and there has been no presentations / communication from company for a while now.
Disclousre: Invested. Bullish on the stock even if the margins go down as as the valuation provides lot of comfort.
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Mullapariyar dam and Cochin shipyard donât have a connection . Some people are creating panic like if mullapariyar dam collapse then eranakulam district will be flooded and destroyed which is baseless. Cochin shipyard is in ernakulam district .I donât see any other connection .
Reporting From Kerala 
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Great. Thanks for the information.
Q3 Results
Growth is back. However profitability decreased due higher raw materials costs.
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Can someone shed light on order book status for Cochin Shipyard? Specificially any update on âNext Generation Missiles Vessel contractâ for Rs. 10,000 crore which was in L1 stage when last updated.
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