Garden Reach Shipbuilders, Cochin Shipyard: Shipping stocks jump up to 39% in one week; Key reasons behind stellar rally

Shipping stocks jump: Shipping stocks continued their dream run in Thursday's trading session as the scrips surged up to over 11 per cent. At the time of filing this report, Cochin Shipyard was up over 11 per cent, Shipping Corporation of India, or SCI, was up over 6 per cent, Garden Reach Shipbuilders & Engineers Ltd gained more than 6 per cent, Mazagon Dock Shipbuilders Ltd was up over 2 per cent and Dredging Corporation of India Ltd was trading over 1 per cent higher.

What's boosting the rally?

According to Zee Business Research, the government has cleared projects worth Rs 19,000 crore for shipping companies in which five fleet support ships will be manufactured and one fleet support ship will be delivered in four years. This is one of the reasons for the rally in stocks. 

Apart from this, there are company-specific reasons. For instance, Cochin Shipyard is planning to launch three vessels by November 2023. Dredging Corporation of India Ltd. is targeting a turnover of Rs 1,200 crore in FY24 by focusing on expanding its technology and project portfolio, and Garden Reach Shipbuilders & Enginers' total order book is Rs 24,500 crore to make warships and naval surface guns for the Indian Navy.

Another reason behind the surge in shipping stocks is the strong Q1 results, not just in India but also globally. According to the research, Korean shipping companies have also posted healthy results for the June quarter.

At home, Garden Reach Shipbuilders & Engineers posted a 53 per cent rise in net profit at Rs 76.7 crore for the quarter ended June 30, 2023, according to an exchange filing. Cochin Shipyard last week reported a 135 per cent jump in its consolidated profit at Rs 98.65 crore.

Dredging Corporation of India Ltd. posted a net profit of Rs 15.15 crore for the June quarter against a net loss of Rs 15.71 crore logged in the April-June period of 2022–23.

Mazagon Dock Shipbuilders reported a 39.8 per cent year-on-year (YoY) increase in net profit at Rs 314.3 crore for the first quarter, and Shipping Corporation of India reported a 57.1 per cent year-on-year (YoY) jump in its net profit at Rs 171.6 crore for the quarter under review.

How have the shipping stocks performed in the past week?

In the past week, Garden Reach Shipbuilders & Engineers stock has gained 39 per cent, Cochin Shipyard stock has rallied 37 per cent, Dredging Corporation of India shares have surged 10 per cent, Mazagon Dock Shipbuilders shares have risen 13 per cent and Shipping Corporation of India stock has climbed 7 per cent. The headline index Nifty has, in the same time period, lost nearly 1 per cent.

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