Mazagon Dock Shipbuilders Q3 Results Review: Nirmal Bang Upgrades Both Rating And Target Price — Here's Why 

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Nirmal Bang Report

We have revised our revenue growth, Ebitda margin, and PAT margin forecast for FY25, FY26, and FY27 to 25.6%, 23.5%, and 23.3%; 26.8%, 25.1%, and 23.8%; and 24.7%, 25.5%, and 23.2%, respectively, to reflect Mazagon Dock Shipbuilders Ltd.'s management guidance.

According to the management, margins are not expected to drop because the existing order book is being executed on a nomination basis, which has better margins. Other expenses and provisions have increased due to provisions for excess inventory from ships with expired warranties.

While the components are still in good shape and may be used in future projects, the provisions will be reversed upon utilization. The company has projected a 12-15% PBT margin over three years.

Given the current rate of execution, significant booking revenue, and a healthy order pipeline, we believe the firm will likely exceed its expectations.

The company is trading at a 1-year P/E ratio of 20.6x. Given the timely implementation of platforms, strong revenue visibility over three years, and a growing order book, we are raising our rating from Hold to Buy. We value Mazagon Dock at 25x Dec'26E EPS, which is lower than its three-year average P/E of 29.8x, owing to a large order book and great execution visibility.

The revenue/Ebitda/PAT grew by 33.1%/51.5%/28.8% YoY to Rs 31.4 billion/8.2 billion/8 billion higher than our estimate at Rs 28.5 billion/5.6 billion/6.7 billion due to delivery of P15 Bravo which contributed significantly to the overall revenue in Q3 FY25. The liquidity damages of Rs.1.4 billion were adjusted in *Other income*.

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