Defence stocks have been standout performers, making investors a lot of money quickly. Among the top performers is Mazagon Dock Shipbuilders, which has seen a return of over 277% in the past year.
Mazagon Dock Shipbuilders, one of India’s leading defence shipyards under the Ministry of Defence, builds and repairs ships, submarines, and various vessels. Since starting in 1934, the company has delivered 802 vessels, including 28 warships and 7 submarines, according to their Q3FY24 report.
In the past three years, the company’s shares have surged by 1282%. The shares are now trading 1900% above their IPO price of ₹145 per share from October 2020.
It took nearly 34 months for the stock to surpass the ₹1,000 mark after its listing. Then, it took only four months to cross the ₹2,000 mark in September 2023, eventually reaching an all-time high of ₹2,977 per share in the latest trading session.
Strong Order Book
By the end of December, the company had a strong order book worth ₹38,389 crore, providing solid revenue visibility. Key orders include P15B Destroyers and P17A Stealth Frigates, valued at ₹12,269 crore and ₹16,482 crore, respectively. In the submarine and heavy engineering sectors, significant contracts include P75 Kalvari submarines and Medium Refit and Life Certification (MRLC) projects, worth ₹3,725 crore and ₹2,346 crore, respectively.
Favorable Position
India’s strategic location along major international trade routes offers great opportunities for vessel repairs. Key shipping routes between America, Europe, and the East pass close to India’s coastline, presenting significant repair prospects. The Sagarmala project expects coastal and inland waterways traffic to increase 15 times in the next 20 years, boosting the ship repair business.
Industry Outlook
The defence sector is set for growth, supported by the government’s strong commitment. The Ministry of Defence aims for 70% self-reliance in weaponry by 2027 and plans to increase defence exports to $5 billion by 2024-25. In the FY 2024-25 budget, the Ministry of Defence received $74.8 billion (₹6,21,540.85 crore), a 4.72% increase from the previous year and an 18.35% rise from FY 2022-23.
To attract foreign investment, regulatory changes in September 2020 allowed up to 74% FDI through the automatic route and up to 100% through the government route in areas with advanced technologies.
Mazagon Dock’s Q4 and FY24 results are expected on May 29. For the financial year ending March 31, 2024, the company reported a turnover of approximately ₹9,400 crore, compared to ₹7,827.18 crore the previous year.
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