Mazagon Dock Shipbuilders was trading in the red on Friday morning after reporting results earlier this week.
What Happened: The firm's net profit for the April to June period, jumped 132% year-on-year to ₹665.94 crore. Revenue from operations soared 8.5% to ₹2,357.02 crore.
The defence major's order book contracted slightly to ₹36,839 crore at the end of June 2024, compared to ₹38,561 crore reported at the end of March 2024.
Brokerage Views: ICICI Securities was upbeat about the company's near-term performance but also believed the stock is overvalued at its current market price. It expects the company's higher margins to sustain until FY27 showing optimism over major deliveries planned over the next 2-3 years.
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"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%," the brokerage added. ICICI has raised its EPS estimates for FY25 and FY26 by 51% and 73% respectively. The brokerage maintained a "sell" call on the stock and revised its target price to ₹1,165. The brokerage firm also has a sell rating on the company’s peer Garden Reach Shipbuilders.
Nirmal Bang said that the Mazdock's performance was above its expectations. It also expressed optimism over the firm's “Navratna" status that was conferred in 1QFY25, which leaves Mazdock's board with significantly higher powers.
"As a result, capex decisions can be taken without any restriction or without any reference to the Ministry, which will facilitate quicker decisions. Mazdock can collaborate for significantly higher financial exposure of up to ₹10 billion (₹1,000 crore) for each collaboration or joint venture," Nirmal Band said in its note.
The brokerage has marginally increased its FY25 EPS estimate by 3.6% but reduced its FY26 EPS estimate by 0.7%. It sees revenue, EBITDA and PAT expanding by 22%,59% and 31% respectively during FY24-FY26. The brokerage had a "sell" recommendation for the stock with a target price of ₹4,468.
Price Action: Shares of Mazagon Dock Shipbuilders were trading almost flat on Friday. It was up 0.82% at ₹5,039.30.
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