Rally In Mazagon Dock – What’s Pushing It?

The Indian government has kept their focus on the domestic defense sector and following that trend Mazagon Dock has caught a rally that investors are in awe of. In the past 12 months, the stock has given 217% returns and if we look back 5 years the stock has given 1,200% returns, a multibagger in every sense. 

Now let us see what is pushing the stock up;

Massive Orderbook and Capex

Mazagon Dock has an order backlog of about Rs. 40,600 Cr, this is to be executed over the next four years and gives strong revenue visibility. The large scale orders of next-generation destroyers with an expected value of Rs. 50,000 crore and the next phase of conventional submarines with an expected value of 43,000 crore and others including frigates, vessel repair orders etc give the company comfort in terms of future order inflows.

The Company is planning to set up a green field shipyard at its Nhava Yard in a phased manner with short-term and long-term development plans subject to better visibility concerning large ticket orders. It has plans to build a new Floating Dry Dock of 15,000 Tonnes capacity to undertake the construction of advanced and next-generation vessels.

Future Prospects

The plan of the Indian Navy from 2015-2030 to produce most of the fleet domestically built offers a huge opportunity for the company. The Indian shipbuilding industry’s order book is expected to receive a good boost on account of the Indian Navy and Coast Guard’s ambitious ship acquisition plans. As per the national perspective plan of the Sagarmala project, coastal and inland waterways traffic is expected to shoot up 15x over the next 20 years and will lead to a 5 times rise in traffic capacity.

Conclusion

Despite the euphoria around Mazagon Dock prospects, there are risks emanating from the depleting current order book and considerable uncertainly around the ordering

Timelines but the markets are very confident about the prospects and are willing to bet on it.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.