Mazagaon Dock extends rally to 8th straight day; zooms 27% in two days

Shares of Mazagaon Dock Shipbuilders hit a new high of Rs 1,062, as they rallied 8 per cent on the BSE in Tuesday’s intra-day trade amid heavy volumes. In past two trading days, the stock of state-owned ship building & allied services company has zoomed 27 per cent. It was quoting higher for the eight straight trading day, surging as much as 41 per cent during this period.

At 09:27 AM; Mazagaon Dock Shipbuilders was up 7 per cent at Rs 1,056, as compared to 0.04 per cent decline in the S&P BSE Sensex. The average trading volumes at the counter jumped 1.5 times today. In first 15 minutes of trading, a combined 4.9 million equity shares had changed hands on the NSE and BSE.

In past one year, the stock price of the company has skyrocketed by 280 per cent as it reported strong earnings for the financial year 2022-23 (FY23) and healthy order book position. In comparison, the S&P BSE Sensex has rallied 12.8 per cent during the period.

For FY23, Mazagaon Dock Shipbuilders had posted 83 per cent year-on-year (YoY) jump in its consolidated profit after tax (PAT) at Rs 1,119 crore on healthy operational performance. Revenue from operations grew 36.5 per cent YoY at Rs 7,827 crore.

As on March 31, 2023, total order book position of the company stood at Rs 38,755 crore, which provides execution stability and consistent cash availability.

Mazagaon Dock Shipbuilders is principally engaged in building and repairing of ships, submarines, various types of vessels and related engineering products for its customers.

The current orderbook is likely to get exhausted by FY27 with peak revenue generation in FY25. In FY24, the company is expecting an order worth Rs 3,200 crore for patrol vessels for Indian Coast Guard and an export order worth Rs 1,000 crore.

Going ahead, analysts at ICICI Securities perceive peak execution through to FY25E based on the current orderbook visibility. However, long gestation period implies free cashflow is likely to decline FY25E onwards with the unwinding of contract liability, resulting in cash depletion.

“Mazagaon Dock Shipbuilders’ lack of order visibility offsets its near-term robust revenue estimate. As a result, we perceive unfavourable risk-reward at current market price,” the brokerage firm said.