Shares of Cochin Shipyard have been on a string run at the bourses for the past year. But analysts at Kotak Securities think the PSU stock is headed towards a sharp correction.

The Cochin Shipyard Analyst: Analysts at Kotak Securities maintained the “sell” rating for the stock with a target price of ₹540. The target indicates an around 52% downside from the stock’s last closing price of ₹1,141.20.

The Cochin Shipyard Thesis: The brokerage in its research note, said that the company is making significant progress in expanding its presence in the US defence ship repair market, with a particular focus on securing the IAC-2 order. Cochin Shipyard’s signing of a Master Shipyard Repair Agreement (MSRA) with the US Navy is expected to pave the way for its entry into this lucrative market segment, which is estimated to be worth US$2.5-3 billion.

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Secondly, the analysts said that the establishment of a new international ship repair facility highlights the PSU’s technical capabilities. The brokerage also said that the composition of Cochin Shipyard’s order book is anticipated to be balanced, with defence and non-defense projects expected to account for approximately 60% and 40%, respectively.

Despite these positive developments, Cochin Shipyard’s near-term prospects are deemed to be muted. The IAC-2 order which is critical for the company still has some uncertainties lying around, the analyst added.

The defence major has been on a bull run along with other PSU stocks. In the past year, the stock has surged up over 300%.

Price Action: Cochin Shipyard’s share price was down 1.22% to trade at ₹1,127.25 on Tuesday afternoon.

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