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Shares of Cochin Shipyard Ltd. surged over 8 per cent in intraday trade on June 6, touching a 10-month high of Rs 2,545 apiece, driven by robust trading volumes and continued investor interest in defence stocks following heightened geopolitical tensions.

The defence PSU has gained significant momentum after the Pahalgam terror attack and subsequent military operations, which have reignited interest in India's indigenous defence manufacturing space. The stock has returned nearly 60% year-to-date and 35% in the past one month alone, supported by sustained institutional buying and a favourable policy backdrop.

Cochin Shipyard sees strong earnings but margin pressure persists

For Q4 FY25, Cochin Shipyard reported an 11% rise in consolidated net profit to Rs 287.19 crore compared to Rs 258.88 crore in the year-ago period. Revenue increased by 36.6% to Rs 1,757.65 crore. However, the company saw some margin pressure, with EBITDA falling 8% YoY to Rs 265.78 crore and EBITDA margin contracting to 15.1% from 22.5%.

Despite margin concerns, the robust revenue growth and profit uptick have been seen as positive signs by investors. The company has also declared a final dividend of Rs 2.25 per share, further boosting sentiment.

Nifty defence index surges; volume breakout triggers rally

The broader rally in defence-related counters was also reflected in the Nifty Defence Index, which hit fresh highs as investors rotated into stocks with strong order books and long-term tailwinds. Cochin Shipyard's traded volume was over 3.7x its 30-day average, signaling strong institutional activity.

Stocks like Mazagon Dock, Hindustan Aeronautics (HAL), and Bharat Dynamics also saw positive momentum, adding to the broader sectoral strength.

Analyst view mixed despite price rally

Bloomberg data shows that of the four analysts tracking Cochin Shipyard, two have a 'buy' rating, one has a 'hold', and one recommends 'sell'. The average 12-month price target implies a potential downside of over 43%, indicating concerns over valuation and margin compression.

Technical indicators flash overbought signal

With an RSI of 80.2, Cochin Shipyard is now in overbought territory, suggesting that a near-term pullback cannot be ruled out. However, the long-term outlook remains robust given India's increasing focus on defence indigenisation and export potential.

Conclusion

Cochin Shipyard's rally is a result of multiple tailwinds—strong defence sentiment, solid earnings, volume breakouts, and policy thrust. While valuations may be rich in the near term, the strategic importance of the shipbuilder in India's defence ecosystem makes it a stock to watch.

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