Mazagon Dock Shipbuilders: Buy this defence stock, says Antique; here's why

Antique Stock Broking has reiterated its Buy rating on Mazagon Dock Shipbuilders, highlighting strategic investments and potential orders that could greatly enhance the company's growth trajectory. Their note also underscores Mazagon Dock's strong position in the shipbuilding sector.

Mazagon Dock has embarked on an ambitious expansion plan, including the development of a new dry dock in Nhava village. This project aims to double its shipbuilding capacity. The company's value of production reached Rs 1,119 crore in FY25, meeting 99.5 per cent of the Ministry of Defence's target. This consistent performance highlights Mazagon Dock’s operational efficiency and commitment to national defence goals, as per Antique Stock Broking.

"In our view, the follow-on order for three Scorpene submarines, and six P75-I submarines can significantly elevate the order book and drive medium-term growth in revenue. We believe the quarterly volatility in margins due to spike in provisions is now largely behind us. We maintain BUY rating with a target price of Rs 3,858," it said.

In financial management, the company recognised total provisions of Rs 746 crore in FY25, with Rs 521 crore of this attributed to anticipated losses from two projects. These provisions undergo regular review to align with project progress, ensuring financial stability over the long term. Additionally, Mazagon Dock's participation in iDEX projects, including collaborations on Autonomous Underwater Swarm Drones, showcases its drive for innovation.

Strategically, the company's vision extends internationally with the approval to acquire a 51% stake in Colombo Dockyard PLC. This acquisition positions Mazagon Dock as a regional player in shipbuilding, leveraging Colombo's strategic location to diversify revenue streams and enhance global standing.

Antique Stock Broking highlights Mazagon Dock's substantial order pipeline despite potential delays in finalisation. The company anticipates additional orders, including three Kalvari-class submarines and six under the P75I programme, potentially adding approximately Rs 1.5 lakh crore to the order book. These orders, once confirmed, are expected to significantly boost medium-term revenue growth.

Overall, Mazagon Dock Shipbuilders is on a promising growth path backed by strategic investments, a robust order pipeline, and innovative initiatives. As the company expands its capacity and explores new opportunities, it remains a key player in the shipbuilding industry, with bright prospects for growth and profitability. The target price has consequently been revised higher, reflecting this optimistic outlook.