Mazagon Dock shares: Target price as P75I contract nears finalisation

Antique Stock Broking on Friday said Mazagon Dock Shipbuilders Ltd may soon reverse its recent underperformance as it expects the contract for the Project 75I submarine program to be finalised shortly. It said the final contract value could exceed the earlier estimated Rs 70,000 crore. The brokerage said it remains optimistic about the order for three additional submarines being concluded by H1FY27. 

"The medium-term order pipeline remains promising. While revenue growth may remain subdued in FY27E, it should accelerate in the subsequent years, supported by a larger order book. We remain positive on the stock, given the potential for large order wins, the company's strong position in submarine construction, and the government's focus on developing the domestic shipbuilding ecosystem. it said.

The brokerage maintained a 'Buy' rating with an unchanged target price of Rs 3,407, based on a PE multiple of 42 times FY28 core earnings.

Antique said MDL expects to conclude the contractual negotiations for P-75I submarine project in the next few weeks. It cited recent media reports as well as industry interactions indicating that final order value could be materially higher. 

This, Antique said, should give a boost to the company's current order book of Rs 23,700 crore. Antique said the finalisation of the P-75I contract can significantly elevate Mazagon's near-term order book. 

"Additionally, 3 Nos follow-on submarines, P17B Frigates, LPDs, Destroyers, and MCMV orders can provide a further boost to its order book, and drive medium-term growth visibility. We maintain BUY," it said.

Mazagon Dock recently concluded the acquisition of 41.73 per cent of Colombo Dockyard PLC (CDPLC) pursuant to allotment of shares arising from unsubscribed rights shares (Onomichi's portion) by CDPLC. The company is now in the process of acquiring further shares from the existing shareholders of CDPLC through a mandatory offer. 

"The rights issue was at an offer price of LKR 40 per share. Thus, the total outgo for Mazagon Dock is Rs 190 crore. The deal should expand MAZDOCKS's role from a domestic naval shipbuilder to a regional shipbuilder with global aspirations. We view this development as positive for Mazagon Dock as CDPLC is strong in ship repairs, and has a good market share among Indian shipping companies," Antique said.