Cochin Shipyard share price turns multibagger in one year, but Kotak downgrades the stock to sell; here's why

livemint.com:

Cochin Shipyard share price surged almost 10 per cent in morning trade on Friday to hit their fresh all-time high of ₹1,258 on BSE. The stock opened at ₹1,195 against the previous close of ₹1,146.15 and jumped 9.8 per cent to its fresh peak. The stock has given a bewildering return in the last one year.

It has surged 212 per cent in the last one year while the equity benchmark Sensex has gained only 11 per cent in the same period. In the current calendar year, the stock has jumped 135 per cent. However, brokerage firm Kotak Institutional Equities has downgraded the stock to a 'sell' from a 'buy' but raised the target price to ₹990 from ₹740 earlier as it indicated the current market price of the stock factors in most of the key positives.

Kotak's target price of ₹990 implies a nearly 14 per cent downside from the stock's September 7 closing of ₹1,146.15 on BSE. Kotak pointed out that, as per news reports, the Chief of Naval Staff, Admiral R Hari Kumar, expressed the intent of the Navy to repeat the order of INS Vikrant (IAC-1). The Chief of Naval Staff also spoke of the manufacturing expertise of Cochin Shipyard acquired through INS 1, limiting the case for the prospect of the repeat order going to another entity.

Kotak said that the recent comments from the Chief of Naval Staff are encouraging for placement of a repeat IAC order. The brokerage firm, however, assumes a nearly 10 per cent lower value of the repeat IAC-1 order versus IAC-1 which was of nearly ₹23,000 crore. It expects the repeat order of IAC-1 to be smaller than IAC-2, which was earlier planned and would not have the cost overruns seen in the case of IAC-1 (six-year delay and a six-fold cost overrun).