Shares of Mazagon Dock Shipbuilders, a defence PSU firm, rallied 6.25% to Rs. 811 apiece in Tuesday's trade after the company announced strong December quarter earnings. After losing 10% over the previous three weeks, the stock made a strong comeback during this week, recouping by so far rising 11.55%.
At 12:00 p.m., the stock was trading at ₹797/share, up by 4.50%, on the BSE.
Defence PSU stocks are experiencing a strong bull run as the Indian government looks committed to reducing the import of defence products and purchasing locally produced weapons and systems.
Mazagon Dock has been witnessing strong momentum in the last one year, gaining from ₹267 apiece to its current position of ₹797, generating a stellar return of 199%. The stock saw a one-way spike after hitting a 52-week low of ₹225.4 per share on February 24, 2022, and it has since gained 254%.
The stock increased 185% in the last six months, surpassing the BSE PSU index by 173%, which gained 12.07% during the same period.
The company is one of India's leading defence public-sector undertaking shipyards under the Ministry of Defence (MoD). The company is principally engaged in building and repairing ships, submarines, various types of vessels, and related engineering products for its customers.
On Monday, the company reported an year-on-year (YoY) increase in standalone profit after tax (PAT) of 55% to ₹337 crore in Q3 FY23, up from ₹217.8 crore in the same period last year. Total revenue increased by nearly 19% to ₹1,991.8 crore in the December quarter of FY23, compared to ₹1,673.4 crore in the same period last year.
Further, the company’s EBITDA rose by 46.38% to ₹295.7 crore in Q3 FY23 as against ₹202 crore in the corresponding quarter of last year. The company reported its highest-ever quarterly EBITDA margin of 16.29% in Q3FY23, an expansion of 328 bps YoY and 937 bps QoQ.
According to ICICI Direct Research, Mazagon Dock Shipbuilders has a high order backlog of 42,000 crore rupees which provides the public sector undertaking with strong revenue visibility.
As per the brokerage report, the order book comprises three major contracts, which include Project 17A frigates, Project 15B destroyers, and Project 75 submarines. Major projects for the Indian Navy are also in the works, and four of them are expected to cost over 1.8 lakh crore rupees, it added.
Further, eight next-generation Corvettes will be purchased, and the request for proposals (RFP) for these will likely be released in 2023. ICICI Direct has anticipated that the contract will be worth 36,000 crore rupees.
"We expect the company to deliver earnings CAGR of 24% in FY22–24E, led by 18% revenue CAGR (on better execution) and sustainable margins," said the brokerage house.
03 analysts polled by MintGenie on an average have a 'hold' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.