Cochin Shipyard Ltd (COCHINSHIP) Q4 FY22 Earnings Concall Transcript

Cochin Shipyard Limited (NSE:COCHINSHIP) Q4 FY22 Earnings Concall dated May. 26, 2022

Corporate Participants:

Madhu S Nair — Chairman & Managing Director

Jose V J — Director Finance

Analysts:

Vastupal Shah — Kirin Advisors — Analyst

Mohit Kumar — DAM Capital — Analyst

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

Peter Aggnen — CIMA Wealth Management — Analyst

Vijay Goel — ICICI Securities — Analyst

Nikhil Upadhyay — SIMPL — Analyst

Kaushik Poddar — KB Capital Markets — Analyst

Dixit Doshi — Whitestone Financial — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Cochin Shipyard Limited Q4 and FY ’22 Conference Call hosted by Kirin Advisors. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vastupal Shah. Thank you and over to you, sir.

Vastupal Shah — Kirin Advisors — Analyst

Thank you. Good morning, everyone. I would like to welcome Shri. Madhu S Nair, Chairman & Managing Director of Cochin Shipyard Limited; Shri. Jose V J, Director Finance; and Shri. Syamkamal N, Company Secretary of the Cochin Shipyard Limited.

Madhuji, over to you, sir.

Madhu S Nair — Chairman & Managing Director

Thank you. Good morning, everyone, for joining. Happy to have all of you here again. The year that’s just gone by has been, I should say, a mixed bag for Cochin Shipyard Limited. We have done reasonably well in certain segments. There has been some disappointments. I’ll just briefly touch upon what has happened in various areas and various things. Shipbuilding projects: the key activities were on the Indigenous Aircraft Carrier, which has now gone through three rounds of sea trials, which is a very significant achievement and the vessel is readied for — being readied for delivery as early as July of 2022 and for a potential commissioning into the Indian Navy by August 2022. So, significant efforts were put on the IAC. And from a fiscal point of view and financial point of view, the IAC attained the targets which we had set for ourselves for the year. We also effected deliveries of various vessels.

So, most of the projects that was in various phases of construction in the company has been delivered now. So we have delivered from the Floating Border Out-Post, which we are doing nine numbers; six have been delivered, three are in advanced stages and getting readied for delivery next month. 500 pax vessel had been delivered. The second vessel has completed all trials and is actually just waiting for formalities from the client side to be handed over. So, that also would happen in fact as early as this month-end. We are building a series of boats for the Cochin Water Metro. The total order value is about INR175 crores. We faced disappointment over there. We had delivered one vessel, four are in advanced stages in the company, and 16 in various stages in the company. But we have not been able to deliver it, small technical hitches. But as we speak, we should be in a position to deliver another four of those coming months and those vessels are getting readied.

So all in all, there has been deliveries during the last year. And the progress — work that is happening right now, I’ll probably touch upon it as we move forward. For ship repair projects, generally has been a steady year. Mumbai operations could do better even though we have not been able to attain levels what we wanted. So, Mumbai has done about INR85 crores approximately turnover in ’21-’22. Kolkata operations has even done better than expected. Actually we’re just expecting to get started over there. We have been able to do — Kolkata could give a turnover of around INR33 crore, INR34 crore. And we just started operations in Andaman because COVID got a little bit prolonged in Andaman, there was still travel restrictions in the Andaman. So Andaman, we just got started. Otherwise in the Kochi main unit we had Naval projects, we had other projects also. Generally things went well.

On the shipbuilding side, looking into the future. We have been able to secure some new orders which has been very gratifying for us. We have secured a new order for a large dredger for Dredging Corporation of India and this is a very significant win for us because the order value is about INR900 crores approximately and in all probability this could go up to three vessels. What we have signed now is one vessel, but it could go up to three vessels and it’s also in cooperation with international leader IHC of Netherlands and this is under the Make in India initiative. So, this is a large project that’s come in. We have also been successful in concluding contract for eight numbers multipurpose vessels with a German client and this again is a very significant achievement because this is coming from what is called the short sea vessel market in Europe and the area from where we have got the German order is actually the home of short sea shipping in West Europe.

So it’s not very easy to break into that group, but we have been welcomed into the Group and the first set of orders have been signed. The next generation missile vessels which we have been talking, you are all aware of where we are L1. The complete negotiations everything is concluded and it is actually going through the final round of approvals in the Navy. We have been promised prior to June of this year, but we are also getting conflicting signals. There are no issues, but then the process is taking a bit longer than what we probably thought. So there could be a few more months, but we have still been promised before June. There’s nothing to be discussed further. Contracts and pricing, everything is done with the committees. So why I said it’s been generally gratifying is like you’re aware that we have embarked on what we are calling the CRUISE 2030 strategic initiative, which we prepared along with the Boston Consulting Group.

So segments in the CRUISE 2030; which was dredgers, short sea vessels into Europe we have been able to break into that, tugs is one significant area that has been mentioned and we have been through subsidiary in Udupi, the erstwhile Tebma Shipyard Limited, which we have now renamed as Udipi Cochin Shipyard Limited. We have been able to do the first two tug contracts. So, we have done this with the company called Ocean Sparkle Ltd, which is — you would have seen in the press, which has recently been 100% acquired by the Adani Group. So, it’s again good to get started with two tugs, which is now potentially going to the Adani Group. So all in all, the order intake side we feel we have been comfortable. We have also been strongly talking in Europe and I’ll talk about that a little bit later as we move forward. On the new infrastructure and the capex investment, again it’s been disappointing.

Both on the new dry dock project, which is being executed by L&T on a turnkey basis, progress has not been as expected. There has been technical challenges and the revised date that has been talked now is July 2023 for completion of the civil infrastructure and thereafter the large crane is to be installed. The crane is practically ready in Korea so it’s waiting to be shipped out because we are not in a position to receive it right now, the civil construction is not yet complete. But once the crane comes in, we expect after installation and commissioning; Q1, early part of Q2 2024 we should be able to get the dry dock up and running. The next large capex infrastructure has been the International Ship Repair Facility, the ISRF. The ship repair facility which we are creating, which is what percentage is completed? 78% completed. But then the turnkey infrastructure company that was executing the project, Messrs Simplex Infrastructure Limited, we have had difficulties and we have actually terminated the contract in February.

We never wanted to do it, but we thought there was no other option and there has been continuous failures and we have actually terminated those contracts. So, now we will have to split the balance work into various contracts and then execute it ourselves and that is happening. And then we are — so that’s setting back the capex projects by some time and now the expected completion would be late 2023. Hooghly Cochin Shipyard Limited, which is being executed through the subsidiary in Kolkata, that is complete. The infrastructure is complete. There were again delays in a particular crane not being able to be installed by the OEM. It got delayed by almost six months the crane installation. But for that crane, everything was completed. So, the crane has also now been installed and the facility is ready. We are sensing the potential further orders to flow in from Europe.

There is a new activity happening in Europe — West Europe especially in Norway. Green ships and advanced technology vessels and we are talking many projects simultaneously and we are being received well. And you’re aware that Cochin Shipyard is currently building set of two vessels, which are autonomous zero emission vessels for Norwegian clients, which we’ll be delivering 15th of June. So, those projects are giving us good visibility in Europe so that we expect to continue. So this year ’22-’23 we expect to garner more newbuilding orders from Europe for high-end advanced vessels. The overall market in the industry we feel is exciting — international market I’m talking. The international market looks exciting. The West European short sea market looks promising. The Norwegian Scandanavian green vessel market looks promising and we expect to get something more over the tugs, which India has taken the view that tugs to be operated in India should be built in India.

As I said, two vessels are already contracted, but we expect further tugs to be done, but tugs we want to do it from the subsidiary in Udupi. Overall both the subsidiaries — the subsidiary in Udupi which has now been rebranded as Udupi Cochin Shipyard Limited, is executing projects. They are actually participating in the Cochin Water Metro projects. Eight of the vessels being built by Cochin Shipyard Limited is actually being built at UCSL. They are doing 20 small fishing vessels and they now got this new tug orders. We are trying from Europe to get some orders into UCSL. HCSL is still waiting for its first order from the commercial side. But in inter-corporate within the group what we have done is like there has been a large — there’s a INR20 crore order, which is to be executed for Kolkata Port Trust. That has been handed over to HCSL to get the systems up and running.

Just to talk about system improvements in the company. The company has been operating over the last 10 years on a large SAP platform and this SAP platform we have now migrated to the new S4 HANA platform. So this migration, which has been a significant system improvement migration in the company, has happened. The 3D experience platform, which we are now implementing in our design and engineering, is almost ready to be rolled out. It’s been a tough activity on that because this is the first time that such a large platform, which is being used by the industry at large, is being tried out in shipbuilding in the country. And we hope the effects of this large scale transformation and the digital pain will unfold as we move forward and it will give us positive effects as we move forward. So, this is overall on what is happening in the company. As I said at the start, a little bit of a mixed bag looking at the year that’s just gone by.

The coming year — the present year ’22-’23, I should actually react a little bit cautiously. It’s going to be more or less flat because of the way certain orders are structured. The Indigenous Aircraft Carrier turnover would taper down a little bit. The new large projects which we are having is ASW Corvette which is a INR6,000 crore contract, out of which we have booked only INR300 crores till now. But the balance ’22-’23 it is more in the hull part, it’s more in the steel part. In the steel part, the turnover will not be much. The larger turnover will actually come in from the year ’23-’24 onwards. So, this year we will face some headwinds on the shipbuilding side. Ship repair should go steady and should go — should improve a fair bit from where we are right now. But overall from a turnover point of view, I think this should be largely flat as we go into ’22-’23.

But ’23-’24 and ’24-’25 because ASW Corvette projects will peak, also the next generation missile vessel projects will peak, the eight vessels which we are doing for the Germans that turnover significantly will come next financial year that’s ’23-’24. The dredger contract which we have signed now, right now it’s in the engineering phase and coming March-April onwards we start construction on that. So, that turnover will also come in ’23-’24. So ’22-’23 Just wanted to be cautious on this because more or less flat, margin should remain generally intact. But as we move forward into next year and ’23-’24 and ’24-’25, we see ’23-’24 should see a fairly significant jump from where we are. So, this is just to give a feel of where we are currently and where we could be headed.

With this, I think like I can stop and would actually be happy to answer questions. Thanks a lot. Thank you.

Questions and Answers:

Operator

Thank you, sir. Please note this call will run until 11:00 AM. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Mohit Kumar from DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital — Analyst

Good morning, sir, and thanks for the opportunity. Sir, my first question is on the next generation missile vehicles. What’s the timeline of finishing, is it six years?

Madhu S Nair — Chairman & Managing Director

It’s more than that, it’s about 8.5 years.

Mohit Kumar — DAM Capital — Analyst

It will be a confirmed order?

Madhu S Nair — Chairman & Managing Director

Can you repeat that question again?

Mohit Kumar — DAM Capital — Analyst

When we expect this order to be converted into firm order?

Madhu S Nair — Chairman & Managing Director

We are actually expecting this by end of June. But maybe I think just to be conservative, I think we should give it a few more months. Maybe another — so something between June and September that is what would be better to say.

Mohit Kumar — DAM Capital — Analyst

And sir, what kind of revenue you expect from ASW Corvette in FY ’23 and FY ’24 and ’25? I’m just trying to figure out the ramp-up will happen.

Madhu S Nair — Chairman & Managing Director

Just a minute. So the ASW Corvette in FY ’23, we should be somewhere between INR1,000 crores to INR1,200 crores. And FY ’24 we should be between INR1,200 crores to INR1,400 crores.

Mohit Kumar — DAM Capital — Analyst

So, it will be largely flattish. Is it right? Largely flattish 2024?

Madhu S Nair — Chairman & Managing Director

’23-’24 would be about — see, this year ’22-’23 from the ASW Corvette, we are expecting only about INR600 crore levels. So from INR600 crores, we’ll go to about INR1,000 crores, INR1,200 crores and then we will go to INR1,200 crores to INR1,400 crores level.

Mohit Kumar — DAM Capital — Analyst

Sir, how do you see the ship repair panning out in FY ’23?

Madhu S Nair — Chairman & Managing Director

Just a minute. Did I get it wrong, Jose? So, let me just correct. I got it wrong. So FY ’23 from the ASW Corvette, we are targeting around INR600 crores. FY ’24 we are targeting about INR1,000 crores to INR1,200 crores, And FY ’25 we are targeting about INR1,200 crores to INR1,400 crores.

Mohit Kumar — DAM Capital — Analyst

Understood. Sir, my last question is how do you see the order inflow for the rest of the year? Are you expecting some big order to get finalized in this fiscal?

Madhu S Nair — Chairman & Managing Director

See, this fiscal we are in advanced discussions in Europe on some vessels. We expect to conclude orders, I can’t say whether it would be extremely large, but then there are multiple projects which we are looking at. So, at least $100 million kind of order should come in current fiscal.

Mohit Kumar — DAM Capital — Analyst

What was the Navy side anything which is…

Madhu S Nair — Chairman & Managing Director

Nothing from the Navy this fiscal.

Mohit Kumar — DAM Capital — Analyst

Understood. Thank you and all the best, sir. Thank you.

Vastupal Shah — Kirin Advisors — Analyst

Can we have the next question? Mr. Mohit Kumar, is that the end of your questions?

Mohit Kumar — DAM Capital — Analyst

Yes. Thank you.

Operator

We have the next question from the line of Sandeep Tulsian from JM Financial. Please go ahead.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

A very good morning. The first question is pertaining to the execution profile of the orders, which will change materially because the variable price portion of the IAC was in final stages and that will get trimmed down in FY ’23 while ASW Corvette execution will pick up. So in this regards, how do you see the margins because what we recall is ASW Corvette order was booked and there was a big gap between the L1 and the final award date between which we had seen significant movement in raw material prices as well as currency. So, how do you expect the shipbuilding margins to pan out over the next two years if you can guide us?

Madhu S Nair — Chairman & Managing Director

See, the shipbuilding margins at an EBIT level, we — would be purely from the shipbuilding side. Currently because of the IAC, we have a significantly higher EBIT levels coming in. But over the next two years like ASW and there is still a little bit of IAC to come in so we could be somewhere around 16 percentage kind of margins at the EBIT levels coming from shipbuilding.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

In FY ’23?

Madhu S Nair — Chairman & Managing Director

Yes.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

Okay. And going forward…

Madhu S Nair — Chairman & Managing Director

FY ’23 we could be blended, including with what is there in the IAC, we could be close…

Jose V J — Director Finance

Around we can say slightly more.

Madhu S Nair — Chairman & Managing Director

Slightly more. FY ’23, the current year we still have a bit of IAC coming in. So, the EBIT level would be about — we can give it about 18 percentage approximately.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

Okay. Understood. Secondly, you mentioned on the revenue guidance that you might be flat on a full-year basis for FY ’23, which is close to INR3,200 crore. So, how would you guide this for each of the segments between shipbuilding and ship repair? What can be the contribution?

Madhu S Nair — Chairman & Managing Director

Ship repair would be about INR900 crores out of maybe a flat. Ship repair current year we have done about INR678 crores so that should go to about INR900 crores. But the shipbuilding — the balance is shipbuilding, out of which the IAC could be about INR1,400 crore levels.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

Okay. And some bookkeeping numbers. From the order book breakup that you have provided in the presentation, IAC still show that INR2,700 crores. So one, if you could tell us how much of revenue was booked in IAC in FY ’22 last year, the breakup between fixed price and the cost plus portion? And what is pending this breakup in the order book between fixed price and cost plus if you can guide, please?

Madhu S Nair — Chairman & Managing Director

Yes. Jose, can you do that?

Jose V J — Director Finance

Yes. Sandeep, Jose here. For FY ’22 full year, we are booked from fixed price around INR563 crores and the remaining is INR1,230 crores from cost plus. INR1,230 crores from cost plus and fixed price INR563 crores so that total is INR1,793 crores from IAC for FY ’22.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

Okay. And the order book portion for each?

Jose V J — Director Finance

The remaining, from fixed prices remaining is around INR1,000 crores and INR1,700 crore from cost plus. So, totally INR2,700 crores remaining to be booked.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

Okay. And last question from my side is on the future large orders. Like other than next generation missile vessels, if you can guide us maybe not in FY ’23, you said nothing from Navy, but if one were to take a two to four-year or five-year view, which are the big contracts which have a high probability for Cochin Shipyard? And any status on IAC-2, it’s completely scrapped or any plans to revise that? If you can give your thoughts on overall basis, sir, please?

Madhu S Nair — Chairman & Managing Director

Overall, as I said, this dredger because the dredger we are going to be about three vessels for sure so give it approximately INR1,000 crore each. So, we have now signed one vessel. The second and third should come in when I was giving a two to three-year profile, those orders should be coming in, that’s for sure. So let’s say another about INR1,800 crore, INR2,000 crore kind of order should come from the dredger. As I said Europe, the green shipping area like there are projects which are at advanced stages of discussion. It will — it’s hanging around a little bit because many of these projects are also supported by the Norwegian government.

So we expect, as I said, we should be — don’t hold me on to this, but then somewhere around EUR100 million kind of an order should actually come in over the next — I give it this fiscal, early quarter of next fiscal kind of a thing. From the Navy, as you are probably aware, there is — there are no big things that’s happening right now. But as we move forward the LPD, Landing Platform Docks, that is again coming back. Those discussions are happening. So LPD, four vessel LPD should be coming in, that is something which we would look at in the pipeline. The second IAC while no firm potential discussions are happening, at least there is better energy there and there are at least discussions that’s taking place. So, that is positive. That’s what I would like to comment right now.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

Understood. So probably just comment is that overall pipeline looks a little bit weaker than how it has been in the past, of course this INR10,000 crore vessel is…

Madhu S Nair — Chairman & Managing Director

That is because — see, that is because see the Navy goes through one large cycle. See, if you are looking at Cochin Shipyard, see between the ASW Corvette which is INR6,000 crore order and the NGMV, which is INR10,000 crore; we got significant orders. So INR15,000 crore, there are two orders that’s come in for Cochin Shipyard. Similar orders have gone in elsewhere also. So even when you look at it in US dollar terms, these are large value contracts that’s happened. So, we feel generally comfortable because there’s no point of blocking orders. Even these two orders as I said right at the start, the NGMVs, our last vessel is around eight, 8.5 years. I think that’s generally good to have the backbone. With this backbone, we should actually be getting in the orders of say around 100 million kind of a thing every year if you can garner, then I think we are good.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

No. But comment was because our topline, if you look at it in the last four years, has been close to that INR3,000 crore number. And to grow that I mean of course of infrastructure delay…

Madhu S Nair — Chairman & Managing Director

Correct, I do agree. Because the growth — ship repair will have to grow faster, shipbuilding because there’s a particular ramp up that will happen in shipbuilding. But when the ASW and the NGMV comes in, we expect that topline also to grow. When the ASW and NGMV happen together, we expect that to grow.

Sandeep Tulsiyan — JM Financial Institutional Securities Limited — Analyst

Alright, sir. Thank you for taking the questions. I can’t take any more time of other participants. I’ll get back in the queue. Thank you.

Operator

Thank you. We have the next question from the line of Peter Aggnen [Phonetic] from CIMA Wealth Management.

Peter Aggnen — CIMA Wealth Management — Analyst

Good morning, sir. The first question is that if you can give some color on the raw material basket. So, what was the raw material basket cost in the last two, three years and how do you foresee the raw material pressure going forward?

Madhu S Nair — Chairman & Managing Director

See, if you’re alluding to the commodities like steel, steel pricing has definitely gone up. And the newer projects which we’ve taken, for example the German project which we have taken or the dredger we have taken, we have factored current steel pricing. It has cooled a little bit over the last, let’s say, two months or so. But steel pricing is actually high. It’s something that was around $700, $750 a tonne, had gone up to around $1,100, $1,200, or even slightly more than that per tonne. But the good part for us is many of these projects we are doing, especially the Naval projects, are low on steel so the overall impact is not extremely high. But yes, steel price increases are a point of concern for the entire shipbuilding industry and we feel this cooling down which is happening now. We were expecting this cooling down and we feel it will cool down a little bit more. The other major cost increases that has actually happened would be copper has gone up so electrical cables and these electrical things pricing has gone up a little bit. Because of the petrochem increases, paint costs have actually gone up a little bit. So, these are the larger things. But I think from our perspective, generally manageable. This is all I would like to say.

Peter Aggnen — CIMA Wealth Management — Analyst

Sir, in terms — in line with that same question, sir, so can we assume do you have a good — of course, it depends on the contract. So for most of the contracts, do you have a pass-through or…

Madhu S Nair — Chairman & Managing Director

No, we don’t have a pass-through except on the IAC contract. We don’t have a pass-through. All commercial contracts are fixed price contracts, even the Naval contracts are fixed price contracts. So, we don’t have a pass through. So, that is why I said it is actually a point of concern. But when you are signing a new contract for example say on the ASW Corvette, it’s a contract which has been signed in the past. So any increase there, we’ll have to bear the increases. What I’m saying is the ASW Corvette, the entire missile is just 300 tonnes of — 250 tonnes of steel and 50 tonnes of aluminum. So out of 300 tonnes, even if you see some increases which definitely we don’t want that increases, but then I think it’s manageable over the full project cost.

Peter Aggnen — CIMA Wealth Management — Analyst

And sir, in terms of revenue guidance if you can [Technical Issues] a little bit. You had mentioned FY ’23 will be flat. But for FY ’24 and ’25, what kind of growth can we expect broadly?

Madhu S Nair — Chairman & Managing Director

FY ’24, we should see anywhere between 16 percentage to 20 percentage growth.

Peter Aggnen — CIMA Wealth Management — Analyst

And ’25, sir?

Madhu S Nair — Chairman & Managing Director

’25 from that position, maybe another 12 percentage.

Peter Aggnen — CIMA Wealth Management — Analyst

And sir, in terms of the export, what’s the percentage last two, three years…

Madhu S Nair — Chairman & Managing Director

I don’t have that figure right away. But the export has been practically nil last two, three years. Yes, we just have a project for the Norwegian, there’s one project for the Norwegian. But now we are fetching more. See, Cochin Shipyard if look at it in the past about five, six years back, there was a fair bit of export percentage that was — that had almost gone to zero and with the ASKO project…

Jose V J — Director Finance

Around 9 percentage.

Madhu S Nair — Chairman & Managing Director

It’s around 9 percentage. And now we’ll come back a little bit more.

Peter Aggnen — CIMA Wealth Management — Analyst

Sir, my final question is regarding exports only. Just to understand because of the new geopolitical tensions, are we taking more order, part one? And part two is the export market, for example Europe, which you are throwing some light on to get more orders, are they also following some kind of an Atmanirbhar strategy and because of which we may not get orders? Can you throw some light on it?

Madhu S Nair — Chairman & Managing Director

What you said, the geopolitical part not the Ukraine effect, I don’t think we have seen any effect of the Ukraine other than overall price tightening and some decisions being put off to the right a little bit. But we’re definitely sensing a liking for a company like Cochin Shipyard in India. So, let me put it very clearly. I’m not saying anything. I’m saying Cochin Shipyard, we have been actively involved in the European market almost now 18 to 20 years. We are definitely seeing a liking. There’s huge warmth in their discussions and there are multiple projects which we are being involved. I’m not saying all the projects will come towards us, but we are actually being involved on multiple project discussions. So compared to, let’s say, the option of taking some of these new advanced technology, new technology reference to China, people are looking definitely at a place like India.

That is for sure. In fact, if you are seeing like, even our friends in Chowgule in Goa has secured orders out of Europe. So, this is one thing. And the second part you said is like would the Europeans have some sort of Atmanirbhar kind of a thing. They don’t have it right now. They are actually like all they want to select — some of the German orders, all they want is they want some of these equipment to be European make that is not because of Atmanirbhar, that’s because of serviceable reasons because these vessels are shipping market. And it’s a finely tuned market where you can’t take downtime. So some of the critical equipment, they want European brands, which we are also otherwise we didn’t have an issue on that, we have been working on many of those equipments. So, that is not an issue.

Peter Aggnen — CIMA Wealth Management — Analyst

That is all from my side. Thank you so much.

Operator

We have the next question from the line of Vijay Goel from ICICI Securities.

Vijay Goel — ICICI Securities — Analyst

Good morning. Sir, just wanted to understand one thing. What kind of blended EBITDA margin we can expect for next year as we are expecting revenue share from ship this year is going to increase to 28% this year from 20% I think we had in FY ’22. So, what kind of margin differential is there between these two segments?

Madhu S Nair — Chairman & Managing Director

Ship repair, we are getting an EBIT level of something like — it depends a little bit, but 21 percentage to 23 percentage kind of thing. And a blended EBIT level, you’re talking about current FY ’23, isn’t it?

Vijay Goel — ICICI Securities — Analyst

Right.

Madhu S Nair — Chairman & Managing Director

So FY ’23… 18, 19 percentage.

Vijay Goel — ICICI Securities — Analyst

On the EBIT level you’re saying.

Madhu S Nair — Chairman & Managing Director

At the EBIT level.,

Vijay Goel — ICICI Securities — Analyst

And sir, one more thing. You mentioned that in FY ’23, the revenues from ship repair is expected at INR900 crores. But as on date, I think we have order book of about INR500 crores only in ship repair. So, are we expecting more orders in ship repair and will be executed in the same year?

Madhu S Nair — Chairman & Managing Director

See, Ship repair, the order we have said if you note, we have said approximate because ship repair order book is a little bit dicey always. We are giving this a fair bit of guidance only. So ship repair, the order book, see we would be participating in something. We are actually fairly close to securing a fairly big order, which we expect to be executed in our operations with Mumbai on ship repair. So, the confidence is coming from that and it may not have been concluded. In the presentation we wouldn’t give things that’s not concluded, but then the target is coming from the optimism and optimism in which it’s practically done, but then not yet signed, that kind of a thing. We would expect to do — and there’s a large Naval project which is coming in, which we expect to do now in our Bombay operation.

Vijay Goel — ICICI Securities — Analyst

Okay, sir. Thank you.

Operator

Thank you. We have the next question from the line of Nikhil from SIMPL.

Nikhil Upadhyay — SIMPL — Analyst

I hope I’m audible?

Madhu S Nair — Chairman & Managing Director

Yes.

Nikhil Upadhyay — SIMPL — Analyst

Hi sir. Thanks for the opportunity. Sir, two things. One is at the AGM, you had mentioned when we had raised the question that would we be looking at shipbuilding of say the large vessel like the Panamax or Suezmax and you said the focus would only be on the niche segment. Now just to understand this niche segments and even in the call, you mentioned that the order which we’ve got from the German operations of the dredging. What I want to understand how large are we in presence in these segments, how is the competition in these segments and the way we see the profitability in large [Technical Issues]?

Madhu S Nair — Chairman & Managing Director

Nikhil, you are coming a little bit broken. I heard what you said on the what is niche and what is the expectations on that. But what was the last part you said? Can you repeat that again?

Nikhil Upadhyay — SIMPL — Analyst

[Technical Issues].

Madhu S Nair — Chairman & Managing Director

You’re again broken. You’re very much broken.

Operator

Mr. Nikhil, if you could kindly go off the speaker phone and come on the headset will be much easier for us to hear you.

Nikhil Upadhyay — SIMPL — Analyst

I’m on headset only.

Madhu S Nair — Chairman & Managing Director

Now you are better. Yes, go ahead.

Vijay Goel — ICICI Securities — Analyst

I was trying to understand that how dark is the niche.

Madhu S Nair — Chairman & Managing Director

Okay. See this — let me talk about two spaces we have. One is the European short-sea market. So, the European short-sea market is a set of mid-sized vessels. These are vessels which would be about 7,000 tonnes, 8,000 tonnes dead weight. So, each of these vessels would be size-wise about 120 meter long. Now these are vessels which operate in the rivers and the coastal areas in Europe. So they travel across the Rhine river water season, they do trading into the Baltics, they do trading into the Caspian, and also across West Europe on the sea coast. Now this market is fairly big. There are about 2,500 ships out there in this market and this fleet is very old. The fleet is about 18, 19 years old. So, this fleet will need replacement and they are trying for replacement. They have been waiting. Last four, five years they have been waiting because of all this transition that is happening in the energy market.

So, now the ordering is starting. And these guys would order — there would always be numbers here. That is why — see, we are now talking eight vessels. There are many, many shipping companies like this and these are — all the funds are raised like our mutual funds, they do these like KG companies and then they raise funds in closed groups. Part will be funded so almost 50 percentage will come as equity from [indecipherable]. So, there is a particular ambience under which this whole market happens. And the vessels there will always be numbers and it’s a continual flow. So if you can pick up orders, we can actually pick up large numbers. In fact Chowgule in India, I mentioned this is one company which was active in the slightly more smaller niche vessel segment in the past. Chowgule has been a different company in the past also. They have executed more than 20, 25 vessels into Europe in the past.

We are now getting into a slightly more larger space. We are doing about 120 meter, 130 meter kind of vessels. So, we feel if we can deliver this vessel good because these are not — these are just clearly European grade vessels of a reasonably high quality. It’s not flashy. It doesn’t have anything great on it, but it’s steady straightforward things. But deliver this in good time and at a competitive price, I think there is a fairly large market available there. Similarly, on the Scandinavian side, these are advanced vessels getting readied for new energies. It could be ready for methanol, it could be ready for hydrogen. So, then the competition is not big, and they are comfortable only with companies like Cochin Shipyard or similar in East Europe or some companies of course in China, which is good on engineering and which are ready to do a little bit high-end engineering. So, we feel connected on both these spaces.

Nikhil Upadhyay — SIMPL — Analyst

And any competition from the Greek shipyards because they’ve been doing these ships for a long period of time?

Madhu S Nair — Chairman & Managing Director

No, competition is not great. Competition, one large area of competition is Turkey. Turkey has come up very, very strongly in the past and since they’ve got a European flavor also. The other areas are East Europe, Romanian yards, Holland. So from a pricing point of view, we may be able to outsmart the East European. Turkey is always tough. But — and then, of course, there are these mid-sized Chinese yards.

Nikhil Upadhyay — SIMPL — Analyst

Secondly, sir, what we are looking at when we are talking to most defense companies and there is a big push on export and to the friendly nations like Philippines, Malaysia? And these are all coastal countries bounded by the seas and who have their own shipping requirements for their own Navy. So is Cochin Shipyard doing anything on those sort or do we have anything for any of the products, which we have already delivered to be exported to these markets? Anything which we are looking at probably we can grow a thing in a significant way?

Madhu S Nair — Chairman & Managing Director

We are aware and we are looking at these spaces, but then we haven’t seen anything large in these areas because when you’re talking about Philippines, Philippines has also got a shipbuilding ecosystem which can actually deliver these things. So unless there is a governmental involvement or something else, we are not very sure whether these markets will open up. But yes, the coast guard, the offshore patrol vessel market is all available. But whether it will mature immediately, I’m not too sure. So, we are just watching this space. We haven’t done anything specific over there. But we are ready that we are participating in the narrative, but we haven’t seen anything specific happening.

Operator

We have the next question from the line of Kaushik Poddar from KB Capital Markets. Please go ahead.

Kaushik Poddar — KB Capital Markets — Analyst

I just missed it, what is the turnover progression you are looking at? I mean this year will be flat, you said, is it?

Madhu S Nair — Chairman & Managing Director

Correct.

Kaushik Poddar — KB Capital Markets — Analyst

And what about FY ’24 and ’25.

Madhu S Nair — Chairman & Managing Director

I said we could grow at 16 percentage to 20 percentage and ’25 — no, FY ’24. FY ’25 12 percentage.

Kaushik Poddar — KB Capital Markets — Analyst

FY ’25, 12%, okay. And in your segmental reporting, you have given unallocated — the segment unallocated, there the profit has — PBIT has gone up from INR4.55 crore to INR142.96 crores. Can you please explain that?

Madhu S Nair — Chairman & Managing Director

Jose? On the unallocated segment, it’s gone up from…

Kaushik Poddar — KB Capital Markets — Analyst

From INR4.5 crore to nearly INR143 crore, the segmental accounting in unallocated segment.

Jose V J — Director Finance

That is mainly because we had some other income which is a one-off nature. This is because of that because as CMD mentioned, we had a contract termination for the capex EPC contractor. So, there was some bank guarantee and cash spend towards that. And similarly, there was an arbitration case, which was — award came in favor of us so that income was also there. So, the last — you can see that other income has one-off this year quite a lot because of that.

Kaushik Poddar — KB Capital Markets — Analyst

And in the ship repair thing, of course you have said that your turnover will go from, say, INR678 crore this year to INR900 crores. That’s fine. But I don’t see too many repairs of private ships. I mean, is it something you are not looking at?

Madhu S Nair — Chairman & Managing Director

No. See private ship we definitely look at. See, the whole thing is it’s mix and match of what is the best and what is more profitable. As a general rule, private ship owners especially in India — see a foreign ship owner is not just coming for repair, nobody does it that way unless he is active in this area. So, generally the Indian shipowners actually bring in vessels. We do handle a lot of private ship repairs also, but the money is elsewhere. And the money is because if it’s a Navy or a Coastguard or a Shipping Corporation of India or a Dredging Corporation of India, they all have a particular method of planned repairs and they spend money in that particular thing. What a private shipowner does is he comes into a yard like Cochin Shipyard only to do what he can’t do elsewhere.

He will actually get it done in our docks, underwater work is what they will do with us and then they take it and then [Technical Issues] local workshops and their Superintendent will handle it themselves and they do it at the lowest ever price. So, that is a model for most private ship owners. So, they restrict our part to say underwater or the critical works. But if it’s a Navy or a Coastguard, they do the full package and we are more keen to do it that way. But as we move forward and we build up our new ISR and then the new dry dock, we will go for larger level private from the export market, from the international market. They handle things a little bit differently. Indian shipowners, the private shipowners, generally mostly — most people are with secondhand vessels. They don’t want to spend too much on those vessels.

Kaushik Poddar — KB Capital Markets — Analyst

And lastly, this dry dock facility you’re putting up, will that handle — I mean, will that make different kind of vessels or is there more — I mean different, say, higher dead weight sort of thing, or is it more…

Madhu S Nair — Chairman & Managing Director

No, it’s a much larger one. It’s a much larger one.

Kaushik Poddar — KB Capital Markets — Analyst

Okay. And do you see — you said that this year the margin is 19%. Next year also, you see — that is FY ’24 also you see the margin at that level or will it come down?

Madhu S Nair — Chairman & Managing Director

See EBIT, we are not exactly planning this out, but then 18 percentage, 19 percentage EBIT levels I think we should be able to hold.

Kaushik Poddar — KB Capital Markets — Analyst

That’s a steady state you are thinking of?

Madhu S Nair — Chairman & Managing Director

Correct. Correct.

Kaushik Poddar — KB Capital Markets — Analyst

Okay. And irrespective of this raw material price rise and all those things, so how do you plan to tackle this visibility in the raw material prices?

Madhu S Nair — Chairman & Managing Director

See, raw material price, if you are getting in commercial orders of larger ships, we will have to block the raw material because then the steel costs are a very major factor over there. Today, the vessels we are handling now the midsize segment and, let’s say, the German vessels; these have got steel, but then it’s all happening within a very short time and we have already factored it in and we have actually — there is a little bit of a pass-through kind of a clause which we are building up with them up or down 5 percentage on either side, nobody talks, but beyond that people chip in that kind of thing which we are trying to do. But on large contracts, we’ll have to be more cautious. That is what we are.

Kaushik Poddar — KB Capital Markets — Analyst

So, this 18%, 19% guidance you are giving, so that should take care of this volatility for FY ’24-’25? Beyond that, probably you have to…

Madhu S Nair — Chairman & Managing Director

It should, it should. See, we are today like pitching orders, which will all be delivered other than the two large Naval orders. Anything we are looking at is actually around ’24. It won’t go beyond that. And later part of this year, we’ll start picking up orders for execution in ’24 and beyond. And by that time, we would have factored in this volatility. So, we would have factored in the higher steel cost and the markets will also be ready because the market, see if it’s a German client or a Norwegian client, he is also looking at pricing which he is getting from elsewhere and they would have also factored in this cost.

Kaushik Poddar — KB Capital Markets — Analyst

And lastly, it’s a question of a longer time frame. Last year, I think you have been given an extension for five years. How do you see your company that is Cochin Shipyard at the end of your term? Where do you see it? What is the destination you are aiming for?

Madhu S Nair — Chairman & Managing Director

See, the destination we are aiming for is spelt out in our CRUISE 2030, we have — that’s a 2030 target. In 2030 roughly internally we have coined about a $2 billion company. Now even if we fall short, I would be happy if we cross INR10,000 crores by 2030. So, that’s top. So, I will leave here early 2026 so by which time, I should admit that COVID and its impact over the last 1.5 years, it has impacted us badly. But then with the large orders which we have, the INR15,000 crore Naval orders, certain things which we are seeing in Europe, ship repair doing well; we should do fairly well. We should — by the time I leave, I think we should be [Technical Issues].

Vastupal Shah — Kirin Advisors — Analyst

Operator, is the management connected with us?

Kaushik Poddar — KB Capital Markets — Analyst

I am connected, right?

Operator

Yes. Give me a moment. Let us check. All right. It appears that the management has dropped. Give us a moment.

Kaushik Poddar — KB Capital Markets — Analyst

Okay. I remain connected. Fine. I am on the hold.

Operator

Ladies and gentlemen, we have the management reconnected. Sir, you may go ahead.

Madhu S Nair — Chairman & Managing Director

Yes. We are just talking to Mr. Kaushik and…

Kaushik Poddar — KB Capital Markets — Analyst

Yes, I am online, yes.

Madhu S Nair — Chairman & Managing Director

Yes. Okay. So, that’s a long-term direction. And let us be clear, this is not going to come just from shipbuilding and ship repair, there will have to be something new also and we — that’s why we have set up the new division called the CSL Strategic and Advanced Solutions. We expect something to come in from that. We expect our subsidiaries, two of the subsidiaries to chip in from Udupi and from Kolkata. So, I would be happy when I leave if I see INR6,000 crores, INR6,500 crores, I think I should be happy.

Kaushik Poddar — KB Capital Markets — Analyst

And the margins are on the same level, right?

Madhu S Nair — Chairman & Managing Director

I think these margins, we should be able to sustain because without these margins, there’s no point doing this business. Shipbuilding, we need to get a particular EBIT level and ship repair with the challenges and the route we take, we need to always see 21 percentage to 23 percentage EBIT level in ship repair. If we do that, blended we should fall around 18%, 19%. This is the hope and this is the direction which we are taking.

Kaushik Poddar — KB Capital Markets — Analyst

This 21% you’re talking of from the shipbuilding, right?

Madhu S Nair — Chairman & Managing Director

No. Ship repair, 21 percentage to 23 percentage. But blended 18 percentage to 19 percentage.

Kaushik Poddar — KB Capital Markets — Analyst

Thank you. All the best for your remaining term.

Operator

Thank you. We have the next question from the line of Dixit Doshi from Whitestone Financial. Please go ahead.

Dixit Doshi — Whitestone Financial — Analyst

Thanks for the opportunity. Most of the questions are answered. Just one question. You mentioned in the other income, there were some one-offs. So, can you quantify for the full year how much would be the one-off?

Operator

Ladies and gentlemen, we have the management drop from the conference. Please stay connected, we will reconnect with the management. Ladies and gentlemen, we have the management reconnected.

Dixit Doshi — Whitestone Financial — Analyst

Sir, my question was you mentioned that this year we had some one-off income in other income also. So, for the full year, how much would it be?

Jose V J — Director Finance

That one-off was around INR86 crores.

Dixit Doshi — Whitestone Financial — Analyst

Speaker A-Dixit Doshi

INR86 crores for the full year.

Jose V J — Director Finance

Full year, full year.

Dixit Doshi — Whitestone Financial — Analyst

Okay, fine. That’s it from my side. Thanks.

Madhu S Nair — Chairman & Managing Director

Shall we close?

Operator

Yes, that was the last question. I now hand it to Vastupal Shah for the closing comments.

Vastupal Shah — Kirin Advisors — Analyst

Thank you. Thanks, everyone, for joining the conference call of Cochin Shipyard Limited. If you have any queries, you can write us at vastupal@kirinadvisors.com. And once more, many thanks to the management team and all the participants. Thank you.

Operator

[Operator Closing Remarks]