Mazagon Dock Shipbuilders share price traded sharply lower in early trade on Monday as brokerage firm ICICI Securities sees a massive downside of 77% on the defence PSU stock. Mazagon Dock shares declined as much as 5.5% to ₹4,700.00 apiece on NSE.
ICICI Securities believes the defence stock Mazagon Dock Shipbuilders share is overvalued at current market price. ICICI Securities has a ‘Sell’ rating on Mazagon Dock Shipbuilders stock and raised the target price to ₹1,165 apiece, from ₹900 earlier. The revised target price implies a downside of 77% from Friday’s closing price.
Mazagon Dock Shipbuilders share price has jumped nearly 70% in three months. It hit a 52-week high of ₹5,859.95 apiece on July 05. The defence stock has given multibagger returns of over 112% year-to-date (YTD) and more than 158% in the past 12 months. Mazagon Dock shares have jumped around 2,000% in three years.
Mazagon Dock Shipbuilders Q1 Results Review
The Navratna PSU defence company Mazagon Dock Shipbuilders reported robust performance in the first quarter of FY25. The company’s consolidated net profit spiked 121% to ₹696 crore in Q1FY25 from ₹314 crore in the year-ago period.
Its revenue from operations in the June quarter increased to ₹2,357 crore from ₹2,172.76 crore, YoY. Total Order Book as on June 30, 2024, stood at ₹36,839 crore.
EBITDA of ₹640 crore was up 2.7x YoY and EBITDA margin increased to the highest level of 27.2% in Q1FY25 aided by lower provisions and deliveries of ships earlier than expected.
“The margins of MDSL have improved in recent times led by ahead-of-time delivery of vessels leading to lower cost being incurred compared to budgeted. We expect high margins to sustain until FY27E as major deliveries are planned over the next 2-3 years. However, once MDL starts executing new orders, its revenue recognition is likely to be milestone based, and hence, EBITDA margin could taper off to 12-15%,” said ICICI Securities.
Considering the elevated near-term margins, the brokerage firm has raised its EPS (Earnings Per Share) estimates by 51% and 73% for FY25 and FY26. Despite factoring in the potential orders of P75 (three additional submarines), P75I and next-gen destroyers, and margins at an elevated level in the near term, it believes Mazagon Dock stock is overvalued at the CMP.
“In our view, while EPS is likely to be range bound at ₹95-120 per share from FY28-32E, there are risks to ordering/execution timelines. We maintain Sell on Mazagon Dock Shipbuilders with a revised TP of ₹1,165 (earlier ₹900/share), as per DCF methodology,” ICICI Securities said.
At 9:50 am, Mazagon Dock Shipbuilders share price was trading 2.84% lower at ₹4,833.65 apiece on the NSE.
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