Defence stock Mazagon Dock Shipbuilders surged nearly 8 percent on Tuesday to its all-time high, rising for the 8th straight session on the back of strong March-quarter results. Since May 26, the stock has jumped over 38 percent.
In today's session, the stock rose as much as 7.6 percent to its peak of ₹1,062.
The stock has also given multi-bagger returns in the last one year, rising as much as 245 percent. Meanwhile, it is up 34 percent in 2023 YTD, giving positive returns in 4 of the 6 months of the current calendar year so far.
Just in June, the stock has advanced over 27 percent, gaining for the third straight month. It rose 7 percent and nearly 14 percent in May and April, respectively. However, it fell 7.8 percent and 9.3 percent in March and Feb, respectively.
The company posted a 119 percent YoY jump in its standalone profit at ₹318 crore in the quarter ended March 2023 (Q4FY23) as against ₹145 crore in the same quarter last year. Revenue for the quarter rose 49 percent YoY to ₹2,079 crore versus ₹1,396 crore in the year-ago period.
Meanwhile, its EBITDA margins also doubled to 10.1 percent versus 5.5 percent in the corresponding quarter of last year.
For the full financial year FY23, its net profits surged 82 percent to ₹1,119 crore as compared with ₹611 crore in FY22 whereas its revenue witnessed a 37 percent growth, exceeding its own guidance of 25 percent.
The company informed that at the end of FY23, it had an order book of ₹38,755 crore, which was spread mainly over two critical projects - P15B Destroyers worth ₹15,814 crore and P17A stealth frigates worth ₹18,501 crore.
"Our channel checks suggest Mazagon Dock might win a repeat of the P75 orders, which could be retrofitted as P75I at a later stage of the submarine. This might end the speculation on AIP technology vendors. To summarize, in the short-to-medium run, Mazagon Dock identifies ₹1.60 lakh crore in opportunity: NGC ( ₹33,000 crore), P75I ( ₹43,000 crore), NGD ( ₹50,000 crore), a repeat of P17A ( ₹35,000 crore). However, NGC and P75I will be key drivers in the short-to-medium term," Antique Broking said. It also noted that the order book was 5 times FY23 revenue.
The brokerage has a ‘buy’ call on the stock with a target price of ₹1,073, almost the same as its current market price.
However, ICICI Securities has a contrarian view. The brokerage has a ''sell' call on the stock with a target price of ₹600, indicating a massive 43 percent fall. MDSL’s lack of order visibility offsets its near-term robust revenue estimate and as a result, the brokerage perceives unfavourable risk-reward at CMP.
"While we expect robust revenue growth until FY25, we believe earnings growth is likely to recede owing to an uncertain order pipeline. In the Q4FY23 earnings call, management mentioned bids for the P-75I programme are likely to be submitted by 01 Aug’23 with an evaluation of bids taking another 18 months. For FY24, management indicated a possible order inflow of Rs42bn along with Medium Refit and Life Certification (MRLC) of a submarine spread over 3-4 years. Besides, there is no clarity on the timeline of repeat orders for destroyers," it explained.
