When markets have been trending in a volatile direction in recent months, shares of Mazagon Dock Shipbuilders have delivered astounding returns to their shareholders by gaining 48% over the course of just six trading sessions, rising from ₹428.75 to ₹632.95.
Extending its bull run, the stock opened higher for the seventh consecutive trading session on Monday. At 1:30 p.m., the stock was up by nearly 7.5% at ₹678.50 on the BSE, trading at an all-time high.
This defence PSU stock began rising on February 24, the same day the Russia-Ukraine crisis erupted, and it has since returned 194% to its shareholders.
In the last three-month period, the share price of Mazgon Dock Shipbuilders has surged from ₹263.10 to the current level of ₹678.50, climbing by almost 158%. Further, over the last one year, the market price of the stock has increased by nearly 160%.
Defence stocks have seen a surge in buying after the companies' order books were filled by the ministry of defence as the government looks committed to reducing imports.
An IBEF report showed that demand for defence equipment in India has been growing due to the ongoing territorial disputes with Pakistan and China over the ownership of the Northern State of Kashmir and the North Eastern State of Arunachal Pradesh, respectively.
To modernise its armed forces and reduce dependency on external dependence for defence procurement, several initiatives have been taken by the government to encourage "Make in India" activities via policy support initiatives.
In the Union Budget 2022–23, the Ministry of Defence has been allocated Rs. 525,166 crore (US$ 67.66 billion), which includes expenditure on salaries of armed forces and civilians, pensions, modernisation of armed forces, production establishments, maintenance, and research and development organisations.
The Ministry of Defence approved the procurement of military equipment and platforms from domestic industries worth ₹76,390 crore in June 2022. The MOD approved the purchase of military equipment and weapons worth ₹28,000 crore in July 2022, including swarm drones, carbines, and bulletproof jackets, according to media reports.
For FY23, the Mazgon Dock Shipbuilders have an order book worth ₹43,343 crore, which essentially comprises four 15-Bravo missile-guided destroyers, four 17-Alpha Stealth Frigates, and six Scorpene submarines, of which four are already delivered. Similarly, one destroyer is already delivered and the second one will be at the end of this month or mid of next month, "MDL said in their Q1FY23 earnings conference call.
For the June ending quarter, the company reported a year-on-year (YoY) increase in standalone profit after tax (PAT) of 133.83% to ₹217 crore, up from ₹92.8 crore in the same period last year. Total revenue increased by nearly 33.32% to ₹2,366.5 crore in the June-end quarter of FY23, compared to ₹1,302.3 crore in the same period last year.
Further, the company’s EBITDA grew two-fold to ₹173.7 crore in Q1FY23 as against ₹70.2 crore in the corresponding quarter of last year. Similarly, the EBITDA margin increased by 34.54% year on year, rising from 5.79% to 7.79%, a nearly 200 basis point increase.
Mazgon Dock Shipbuilders 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.
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