Mazagon Dock Q1 - Euphoria Shrouding Reality; Reports Better Ebitda Margin, Higher Orderbook: ICICI Securities

ICICI Securities Report

Mazagon Dock Shipbuilders Ltd. has reported Q1 FY24 Ebitda of Rs 1.7 billion (down 1.1% YoY and 18.5% QoQ). Key points:

1. Execution in Q1 FY24 comprised mainly of P15B destroyers and P17A stealth frigates;

2. Ebitda margin has improved marginally to 7.9% (versus 7.8% in Q1 FY23); and

3. orderbook as of June 2023 end was marginally up QoQ at Rs 39.1 billion as the company received one Medium Refit cum Life Certification order of INS Shankush at Rs 27.3 billion.

In our view, while the ordering potential remains significant, ordering/execution timelines remain unclear at this stage. At current market price, the stock captures a lot of exuberance that might not fructify as expected.

We maintain 'Sell' on the stock with an unchanged target price of Rs 600, as per our discounted cash flow-based methodology. Repeat orders of P-17A stealth frigates or P15B destroyers are a key upside risk to our thesis.

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