Shares of Mazagon Dock Shipbuilders jumped 5 percent on December 11 after the company bagged a Rs 1,145-crore order from state-run natural gas major ONGC. The contract is for the Part Replacement of Pipeline Project (PRPP), which calls for the installation of approximately 44.4 km of subsea pipelines divided into 19 segments, the state-run shipbuilder said in a regulatory filing.
Mazagon Dock, which produces dredges, water tankers, cargo ships, and multipurpose support vessels, received the order received through a bidding process. The time period by which the order needs to be executed is May 15, 2024.
At 11:47 am, Mazagon Dock shares were trading 3.8 percent higher at Rs 2,130.90 on the National Stock Exchange (NSE). As of December 11, 2023, the stock has rallied over 170 percent, outperforming the benchmark Nifty 50 which has rallied 15 percent during this period. The company has a market capitalisation of Rs 43,044 crore.
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Mazagon Dock is one of the top-performing defence and shipping stocks of 2023, as it has given triple-digit returns year-to-date. In the last six months, Mazagon Dock stock has doubled investors' money, gaining up to 103 percent.
For the quarter ended September 30, 2023, Mazagon Dock reported revenue from operations at Rs 1,827 crore, up 7.3 percent on-year. Its net profit for the period jumped 55 percent YoY to Rs 332.9 crore. The company's EBITDA for the quarter also rose 50 percent on-year to Rs 176.7 crore, and EBITDA margin expanded by approximately 300 basis points YoY to 9.7 percent.
While defence shipbuilding has been Mazagon Dock's primary business, ICICI Direct claims that the company was considering expanding into the energy and other civil contracts sectors.
"As this new contract received from ONGC is on a turnkey basis, margins are expected to be relatively lesser than the existing contracts. With this contract, the order book is estimated to be at about Rs 37000 crore (4.7x TTM revenues), giving healthy revenue visibility over FY24-26E," the brokerage said.
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Going ahead, timely placement of the large orders in defence shipbuilding (like new destroyers, frigates & corvettes), ship-repair and submarines (P-75I and additional three kalvari class submarines) segments would be the key developments to watch out for in the coming period, ICICI Direct added.
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