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HDFC Securities Retail Research
Indian Navy's major projects in the pipeline are next generation destroyers, next generation frigates, conventional submarines and next generation corvettes. Mazagon Dock Shipbuilders Ltd. is India's only shipyard to engage in building destroyers and conventional submarines for the Indian Navy. The upcoming bids from the defence ministry could improve the order book and revenue visibility of the company.
Mazagon Dock Shipbuilders Ltd. has ability to sustain the growth in overall performance in a competitive environment, while maintaining leadership in warship building and retaining its largely debt-free status with comfortable liquidity.
Growth momentum is expected to continue in the coming quarters. The company is currently working on seven projects, comprising 15 ships for the Navy, Coast Guard, and others.
While the company can pass through the cost, a sudden spike in prices of raw materials, like steel and energy, can impact profitability. Expectation of improvement in book to bill ratio due to bids in pipeline coupled with timely execution of current order book could lead to re-rating of Mazagon Dock Shipbuilders Ltd.
Compared to its two public sector peers, it scores better in terms of profit after tax margins and return on equity, while its valuation is lower.
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