250% Returns in 1 Year: Multibagger defence PSU hits 12% upper circuit on bagging Navratna status; Buy or sell?

Mazagon Dock Shipbuilders Share Price Today: Shares of Mazagon Dock Shipbuilders rallied nearly 12 per cent to hit a lifetime record-high mark during intra-day on Thursday, June 27, after bagging the ‘Navratna’ status from the finance ministry. The defence public sector undertaking (PSU) has delivered multi-bagger returns to investors over the last one-to-three-year periods.

Shares of the premier warship and submarine builder rallied for the second straight day on June 27 after the finance ministry elevated the defence PSU to the Navratna status. This comes after Mazagon Dock Shipbuilders was granted the Mini Ratna-1 status in 2006 by the Ministry of Public Enterprises.

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Mazagon Dock Shipbuilders becomes India's 18th Navratna company

The leading shipbuilding yard is now the 21st Navratna central public sector enterprise (CPSE) in the country, the third among defence PSUs and the first shipyard to achieve this, according to a regulatory filing by Mazagon Dock Shipbuilders Ltd (MDL) to the stock exchanges. The shipbuilder also holds 47.21 per cent of equity share capital of Goa Shipyard Ltd, a PSU under the defence ministry.

The government is still the largest shareholder in Mazagon Dock Shipbuilders, with a 84.8 per cent stake as of the March quarter. Navratna status is granted to public sector enterprises (PSEs) based on a combination of key financial performance metrics, operational efficiency, and greater autonomy.

To qualify, a company must first be a Miniratna Category I PSE, demonstrating consistent profitability and meeting specific financial benchmarks. The PSUs must also report a net profit of ₹5,000 crore for three years in a row.

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Navratna companies have enhanced financial autonomy, allowing them to invest up to ₹1,000 crore, or 15-30 per cent of their net worth, on a single project without needing government approval, which facilitates quicker decision-making and project implementation.

As of March 31, 2024, the company's order book stands at ₹38,561 crore. During FY24, it secured contracts to build three 7,500 DWT multi-purpose hybrid-powered vessels for a European client, valued at ₹353 crore. For the FY 2023-24, Mazagon Dock has posted a consolidated annual turnover of Rs. 9,467 crore and a net profit of Rs. 1,845 crore.

"The elevation to Navratna status is a testament to MDL's rich heritage and unwavering commitment to excellence," said Chairman and Managing Director (CMD) of MDL. MDL has achieved this feat owing to its strong legacy of technical proficiency in warship and submarine building and a workforce with professional acumen, innovative spirit and unmatched performance that has elevated the growth of the company to new heights. ‘’

““We are deeply thankful to all our stakeholders for reposing their trust with MDL..We extend our heartfelt gratitude to the Ministry of Defence/ Department of Defence Production, Dept of Public Enterprises, DIPAM and our esteemed customers, the Indian Navy, under whose guidance and support, MDL has been able to achieve this milestone”, the CMD added.

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Mazagon Dock Shipbuilders Share Price Trend

Over the past three years, Mazagon Dock Shipbuilders shares have surged by 1,541 per cent and 74 per cent on a year-to-date (YTD) basis. Over the last 12 months, the stock has tripled in value rising over 215 per cent. Analysts at ICICI Securities maintained a "sell" rating on the stock with a price target of ₹900, implying a potential downside of over 70 per cent from current levels.

On Thursday, shares of the defence PSU opened at ₹4,095.25 and gained as much as 11.95 per cent upper circuit to hit a fresh 52-week high of ₹4,585, before settling 8.19 per cent higher at ₹4,415.20 apiece on the BSE. Mazagon Dock Shipbuilders also emerged as one of the top gainers on the BSE today.

According to Trendlyne data, Mazagon Dock Shipbuilders has given better returns compared to Nifty 50 and Sensex in the last one-to-three years. In the last one year, the defence PSU gave multibagger 251.31 per cent returns, against 28.46 per cent and 25.8 per cent returns by Nifty 50 and Sensex, respectively.

In the last three years, Mazagon Dock Shipbuilders delivered massive 1,637.01 per cent returns to investors against 51.39 per cent and 49.68 per cent returns by Nifty 50 and Sensex, respectively.

Mazagon Dock Shipbuilders was incorporated as a private company in 1934. After its takeover by the central government in 1960, Mazagon Dock grew to become the premier war-shipbuilding yard in India, producing warships for the Navy and offshore structures for the Bombay High, Indian Cost Guard.

Since 1960, Mazagon Dock has built 802 vessels, including 28 warships, advanced destroyers, missile boats, and seven submarines. According to the Navratna's official website, the PSU's current portfolio of designs spans a wide range of products for both domestic and overseas clients.

The shipbuilder has also delivered cargo ships, passenger ships, supply vessels, multipurpose support vessel, water tankers, tugs, dredgers, fishing trawlers, barges, border out posts for national and global clientele. It has fabricated and delivered jackets, main decks of wellhead platforms, process platforms, jack-up rigs etc.
 

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