This Large Cap Stock Has Surged Over 130% YTD: Why Analyst Sees Over 60% Fall

Mazdock‘s share price bounced back on Monday to end its three-session losing streak, going up over 10%. Analysts at ICICI Securities opine that the company’s risk-to-reward ratio is skewed at current valuations.

The Mazdock Analyst: Amit Dixit-led team at ICICI Securities maintained the ‘sell’ rating on the stock with a price target of ₹600. The target indicates an over 65% downside from the stock’s last closing price of ₹1741.30.

The Mazdock Thesis: The brokerage firm noted that in the June quarter, the company’s EBITDA stood at ₹171 crore representing a slight decrease of 1.1% compared to the same period the previous year. However, the firm highlights that the company’s EBITDA margin remained stable at 7.9% in Q1FY24, which was slightly higher than the margin of 7.8% recorded in the June quarter of 2022.

The analysts highlighted that the revenue generated during the quarter was largely attributed to specific projects, with significant contributions from various projects including P15B, P17A, and P75.

The brokerage firm said that looking ahead, the defence manufacturer’s management anticipates that the current order book will be fulfilled by the fiscal year 2026-27 (FY27), with the peak revenue recognition expected in FY25.

For the entire fiscal year 2023-24 (FY24), the management projects revenue growth of 10-12% YoY. Additionally, the EBITDA margin is projected to remain at a level similar to that of the previous fiscal year (FY23), excluding the impact of any potential LD (Liquidated Damages) refund.

The firm added that despite the ‘euphoria’ around the PSU’s growth prospects, it sees risks emanating from the depleting current order book and considerable uncertainty around the ordering timelines of P75I and P75 platforms.

Price Action: Mazdock’s share price was up 8.69% to trade at ₹1,892.60 on Monday afternoon.

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