Mazagon Dock Shipbuilders Ltd's strong order backlog at 42,000 crore rupees gives the public sector undertaking strong revenue visibility, believes brokerage house, ICICI Direct Research in its report.
According to the brokerage report, the order book comprises three major contracts, which includes Project17A frigates, Project-15B destroyers, and Project-75 submarines.
Major projects for the Indian Navy are also in the works, where four of them are expected to cost over 1.8 lakh crore rupees.
Further, eight next-generation corvettes will be purchased, and the request for proposals (RFP) for these will likely be released in 2023. It is 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.
The brokerage firm lowers the stock's recommendation from 'buy' to 'hold', which essentially implies that the brokerage no longer advises purchasing the stock; but, if one already owns the stock, one should continue to hold it rather than sell it.
According to the brokerage, improved execution, increased margins, and higher other income were the main contributors to H1FY23 profitability. It also emphasised that the company's reliance on government contracts and on OEMs for essential components were its key risks.
On December 1, 2022, the price of Mazagon Dock Shipbuilders' stock reached a new record high of 932.7 rupees. The shares of the defence PSU business increased about 42.80%, in November, giving stockholders extraordinary gains.
According to a Mintgenie poll, two analysts recommend ‘hold’ rating for the stock.
