Nuvama Institutional Equities has initiated coverage on Knowledge Marine & Engineering Works , a stock backed by ace investor Ashish Kacholia, with a "buy" rating and a price target of Rs 2,500. The brokerage values the stock at 25 times estimated earnings per share of Rs 100, marking the first analyst recommendation since the company's migration from the SME to mainboard platform.

Three Key Bullish Triggers

Maritime Sector Tailwinds and Strategic Positioning

Nuvama's bullish stance is anchored on India's maritime sector reaching a significant turning point, with unprecedented emphasis on infrastructure creation and inland waterway development. The brokerage highlighted Knowledge Marine & Engineering Works' competitive advantages, including a robust 50% order-win rate in an environment characterized by high entry barriers and limited competition in the dredging industry.

The company operates a diversified business model with superior EBITDA margins of 35% to 40%. The order book composition demonstrates balanced diversification:

Robust Order Book and Profitability Outlook

The company's order book performance demonstrates exceptional business momentum, with the latest figures showing substantial growth:

The substantial order book includes contracts from major government entities such as IWAI and DCI, along with significant green tug orders under the Green Tug Transition Programme. The company has recently won 2 out of 6 tenders under GTTP, with ten more tenders expected by 2027.

Strong Growth Projections and Execution Capabilities

Nuvama's financial projections for Knowledge Marine & Engineering Works demonstrate confidence in the company's execution capabilities:

The brokerage expects profitability to rise significantly under the Tonnage Tax Scheme, projecting PAT margin at over 30%. Nuvama also highlighted the company's execution capabilities across geographies like Myanmar and Bahrain, along with its capital and maintenance dredging operations and diversified fleet.

Shareholding Pattern and Investor Interest

The company's shareholding structure reflects strong promoter commitment and notable investor backing:

The backing of ace investor Ashish Kacholia adds credibility to the investment thesis, while the initiation of analyst coverage following the mainboard migration represents a significant milestone that could attract institutional investor attention.

Risk Factors and Market Outlook

Nuvama identified several risk factors including new ventures, policy or weather dependence, international exposure, and potential delays in execution or order inflows. Despite these risks, the brokerage remains confident in the company's ability to deliver consistent performance over the forecast period.

The comprehensive analysis and buy recommendation could serve as a catalyst for further investor interest in the shipbuilding and marine engineering sector, particularly given the favorable industry dynamics and the company's strong market positioning.

Knowledge Marine & Engineering Works Limited has secured a significant regulatory approval that positions the company for enhanced financial performance and growth opportunities. The marine engineering specialist has received approval from the Income Tax authorities to transition from the traditional corporate tax structure to the tonnage tax scheme, anticipated to lower tax obligations and enhance growth through capital expenditure for a decade.

Regulatory Approval Details

The approval, granted under section 115VP(3) of the Income Tax Act, will remain effective for a 10-year period beginning from Assessment Year 2026-27. This regulatory shift represents a strategic milestone for Knowledge Marine & Engineering Works, as the tonnage tax regime offers a simplified taxation method specifically designed for shipping companies.

Understanding the Tonnage Tax Framework

The tonnage tax scheme represents a fundamental shift in how shipping companies calculate their tax obligations. Unlike traditional profit-based corporate taxation, this method calculates tax based on the net tonnage of vessels operated by the company. This approach is expected to reduce tax liability for Knowledge Marine & Engineering Works and provide enhanced opportunities for capital expenditure-driven growth.

Strategic Benefits and Growth Enhancement

The transition to tonnage tax regime is expected to deliver multiple advantages for the company over the decade-long approval period:

The regime may improve profitability by potentially freeing up cash resources for reinvestment, providing enhanced financial flexibility for fleet expansion and operational growth. The streamlined cost structure could enable more competitive pricing in project bids, potentially enhancing the probability of winning tenders and facilitating fleet expansion to meet industry demand.

Company Background and Market Position

Incorporated in 2015, Knowledge Marine & Engineering Works operates in marine craft ownership, dredging services, and repair and maintenance of marine crafts and infrastructure. The company has evolved from a small ship-repair unit to a comprehensive ship-owning enterprise, establishing itself as a player in the small marine craft business segment and dredging services across India.

This approval for the tonnage tax regime marks a significant development for Knowledge Marine & Engineering Works, potentially positioning the company for improved financial performance and sustained growth through enhanced capital expenditure capabilities over the coming decade.