Mazagon Dock Shipbuilders’ stock price has skyrocketed in the last 12 months. The stock has gained 272%, making it one of the best performers in the BSE 500 index during that time; experts expect it to continue rising, while temporary sell-offs cannot be ruled out. The stock price for the day, June 20, 2022, on BSE, was 229.65, which was its 52-week low. The stock price has increased by 338 percent from its one-year low as of June 8, 2024.
Among India’s many thriving shipyard industries is a state-owned enterprise called Mazagon Dock Shipbuilders. Since its main product is Navy vessels, it falls within the umbrella of the military industry. Cargo ships, passenger ships, supply vessels, multifunctional support vessels, water tankers, and so on are only some of the things it manufactures for customers all over the world.
Stocks in the defense industry have gained ground recently on the back of rising optimism in the market caused by government initiatives like Atmanirbhar Bharat and Make in India. New orders have been coming in steadily from both the local and foreign sectors.
According to Stoxbox’s Director of Research Swapnil Shah, the company’s transformation from a ship repair business into India’s premier multi-unit, multi-product warships builder that aids in the realization of India’s Atmanirbhar Bharat goal is noteworthy.
He emphasized that FY23 was a banner year for the firm, noting a 37% increase in revenue and an enormous 83% increase in net income year over year. As of March 31, 2024, across its shipbuilding, submarine, and heavy engineering divisions, the business has a robust order book with a value of roughly 38,755 crores. This demonstrates the firm’s strong track record of consistent, high-quality execution.
Mazagon’s net profit for the first three months of FY23 increased by 105 percent year over year (YoY) to 326.19 crores from a profit of 159.01 crores in the same period a year before.
The company’s quarterly operating revenue was 2,078.59 crore, an increase of 48.85% compared to 1,396.43 crore in the same period the previous year.
Shah further said that the debt-free firm now deals with international players in addition to serving the commercial marine industry and the Indian Naval Forces. A recent agreement to construct a diesel submarine with Germany is indicative of the company’s potential involvement in a wider range of foreign ventures.
The future of the corporation seems to be better as a result of an increase in the Indian government’s military expenditure and more relationships with foreign companies. The company’s bottom line will improve as a result of management’s policy to prioritize shipbuilding over ship maintenance. According to Shah, the firm may improve future income and profits by increasing its involvement in bids on requests for proposals (RFPs) made via the Ministry of Defence.
According to Aamar Deo Singh, Head Advisory at Angel One, the firm has had a healthy increase in profits of 19.5% CAGR over the previous five years, with sales increasing by 37.5% for FY23 as a whole.
Additionally, FY23’s net profit of 611 crores had more than doubled to 1,119 crores.
The stock continues to have widespread support from investors, and there seems to be growing demand for it.
The stock is priced very high, which is a major red flag. It has a high price-to-book ratio, approaching 5 for the business sector.
The company is now trading at a higher PE than its trailing 12-month PE of 18.6.
The RSI is over 80, indicating that the market is overbought.
There is disagreement among technical experts on the stock’s near-term potential.
The stock price rebounded well from the 38.2 percent Fibonacci retracement of the surge that began in October 2020, as noted by Gaurav Bissa, vice president of InCred Equities. It has reached a new swing high, and Bissa predicts that if it can end the week above 935, it will break out to the upside, perhaps taking the stock to the 1,120-1,150 range.
Existing purchasers are encouraged to trail stop loss to 930 and ride the rise, while new buyers are urged to enter the market towards 950 levels, where the risk-reward ratio will be most favorable.
Mazagon Dock is looking lucrative due to recent up moves in the counter, but according to Jigar S. Patel, senior manager of equity research at Anand Rathi Share and Stock Brokers, mean reversion could be possible if it gets rejected from the top due to over-bought daily relative strength index (RSI).
“The range between 1,000 and 1,100 is where one may lock in a profit. “At this time, I would not advise drinking any fresh longs,” Patel added.
