Mazagon Dock Shipbuilders shares up for 4th day; Antique sets stock price target at Rs 1,073

Shares of Mazagon Dock Shipbuilders climbed 3 per cent in Wednesday's trade, taking their recent run to the fourth straight session. Antique Stock Broking is positive on the PSU stock, as it believes Mazagon Dock is on the path to hit Rs 10,000 crore in annual revenues by FY25, noting that the firm is firing only 50 per cent of its capacity utilisation or functioning through less than 10 out of 21 yards. The key drivers for Mazagon Dock stock would be progress on Destroyer P15B and Frigates P17A, which contribute nearly 85 per cent of the company's revenue, Antique Stock Broking said.

The stock rose nearly 3 per cent to hit a high of Rs 822.85 on BSE. Antique Stock Broking finds the stock worth Rs 1,073, suggesting a 30 per cent potential upside on the counter.

The company reported a 119 per cent YoY jump in standalone profit at Rs 318 crore for the March quarter compared with Rs 145 crore in the same quarter last year. Revenue for the quarter grew 49 per cent YoY to Rs 2,079 crore compared with Rs 1,396 crore in the corresponding quarter last year.

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At the end of FY23, Mazagon Dock had an order book of Rs 38,755 crore, which was spread over two critical projects namely the Rs 15,814 crore in P15B Destroyers and Rs 18501 crore in P17A stealth frigates. There were Rs 4,255 crore of works confined to P75 Scorpene-class submarines and Rs 100 crore related to medium refit and life certification of submarine work. Antique Stock Broking noted that the order book was 5 times FY23 revenue.

"Our channel checks suggests 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 vendor. To summarize, in the short-to-medium run, Mazagon Dock identifies Rs 1.6 lakh crore in opportunity: NGC (Rs 33,000 crore), P75I (Rs 43,000 crore), NGD (Rs 50,000 crore), repeat of P17A Rs 35,000 crore). However, NGC and P75I will be key drivers in the short-to-medium term," Antique said.

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As Mazagon Dock enters the final stages of vessel delivery by FY25, the company will engage a higher number of brought-out items. The Rs 36,000 crore corvette order remains the near-term catalyst, besides any progress on P75I, Antique Stock Broking said.

"Even without the new orders, we forecast 13 per cent CAGR for revenue over FY23-FY25E. Margins are favourable in FY23, which could be headed for a decline in FY24. We retain BUY rating with a target price of Rs 1,073 (18 times FY25 EPS). Risks: delay in execution schedule or lower margin work done," it said.

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