ICICI Direct has given Buy recommendation for Mazagon Dock Shipbuilders with a target price of Rs. 560 in its research report issued on Sep 15, 2022

ICICI Direct’s research report on Mazagon Dock Shipbuilders

Mazagon Dock Shipbuilders (MDL) is engaged in the construction and repair of warships and submarines for the Ministry of Defence (MoD) to be used by the Indian Navy along with other vessels for commercial clients. MDL is India’s only shipyard to have built destroyers and conventional submarines for the Indian Navy • The company has an order backlog of Rs 43,343 crore as of August 2022 (6.4x TTM revenues), of which Rs 19,795 crore of backlog is in Project-17A (Nilgiri class frigates), Rs 18,897 crore in Project-15B (Visakhapatnam class Destroyers), Rs 4,400 crore in Project-75 (Kalvari class submarines) • Over the last 10 years, MDL’s revenue increased at 10.5% CAGR over FY13- 22 while EBITDA and PAT increased 3.6% and 3.9% CAGR, respectively, during the same period due to a fall in operating margins.

Outlook

We initiate coverage under the Stock Tales format with a BUY rating. We value MDL at Rs 560 i.e. 14x FY24E EPS.

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