.png)
🚢 Mazagon Dock Shipbuilders Ltd. (MDL) – Long-Term Investment Report
1. Company Overview
Mazagon Dock Shipbuilders Ltd. (MDL), founded in 1774 and nationalized in 1960, is India’s premier defense shipyard under the Ministry of Defence. It is the only Indian shipyard building destroyers and conventional submarines for the Navy and has delivered 805 vessels, including 30 warships and 8 submarines to date.
In June 2024, MDL was conferred Navratna PSU status, making it the first government-owned shipyard and the third Defence PSU with this recognition.
Core strengths include:
World-class infrastructure with capacity to build 11 submarines and 10 warships simultaneously.
Strong order book of ₹29,918 crore as of June 2025, ensuring multi-year revenue visibility.
Zero debt, consistent profitability, and regular dividends.
2. Industry & Growth Prospectus
Indian Defence Shipbuilding Industry
Strategic Importance: India is targeting self-reliance in defense manufacturing (Atmanirbhar Bharat, Make in India).
Budgetary Support: Defence capital expenditure allocation is rising at 8–10% CAGR till FY2030, with focus on naval modernization.
Global Opportunities: Export potential rising — MDL signed a USD 85 million contract for 6 hybrid-powered vessels for a European client.
Growth Outlook
Domestic: Ongoing Project 15B destroyers, Project 17A stealth frigates, and P-75 submarines.
Export & Diversification: Expanding into offshore platforms (ONGC orders worth ~₹6,000 crore) and green shipping technologies (solar-electric & hydrogen boats).
International Expansion: Acquiring Colombo Dockyard (Sri Lanka) for $52.9M (INR 452 crore), marking MDL’s first overseas foray.
3. Financial Performance (₹ crore)
*Tr.FY26 = Trailing FY26
Highlights:
10-year Sales CAGR: ~12% | Profit CAGR: ~16%
Margins improved significantly post FY22 due to milestone-based billing and operational efficiency.
FY25 PAT: ₹2,325 crore (+26% YoY).
4. Historical Valuation
Observation: Post-2022 rerating, MDL shifted from a single-digit PE (6–11x) to multi-bagger expansion (73x high) due to Navratna status, strong order book, and global defense tailwinds.
5. Segment & Regional Growth
Shipbuilding: Destroyers, frigates, corvettes, patrol vessels, and merchant ships.
Submarines & Heavy Engineering: P-75 Scorpene submarines, refits, and life extension projects.
Offshore/Commercial: Jack-up rigs, subsea pipelines, offshore supply vessels.
Regional Expansion: Primary operations in Mumbai/Nhava; global expansion via Colombo Dockyard acquisition.
6. Q1 FY26 Results – Key Insights
Reasons for decline:
Material cost reduction (-19%), but provisioning expense surged (₹540 cr vs ₹3 cr).
EBITDA margin compressed to 11.5%.
PAT impacted by higher expenses & provisions.
Interpretation: Q1FY26 was weak due to project provisioning. FY26 full-year estimates indicate Sales +12% but PAT -13% YoY.
7. Cost Structure (Q1FY26)
Material: 38% of costs (down 19% YoY).
Spares: +87% YoY.
Employee cost: 11% of total, +10% YoY.
Sub-contract: 8%, +9% YoY.
Provisions: 23% of total cost, major driver of profit dip.
8. Future Estimates & Valuation
Growth Estimates
FY26 (E): Sales ~₹12,803 cr | PAT ~₹2,023 cr | EPS ₹52.1 | Margin ~15.8%
FY30 (E): Sales ~₹26,548 cr | PAT ~₹4,253 cr | EPS ₹109.4
FY35 (E): Sales ~₹53,397 cr | PAT ~₹8,554 cr | EPS ₹220
Valuation Range
FY26 blended fair value: ₹1,353 per share
FY30 blended fair value: ₹2,672 per share
FY35 blended fair value: ₹5,375 per share
(Current price ~₹2,670 → trading near FY30 valuations).
9. Peer & Global Comparison
Indian Peers:
Garden Reach Shipbuilders (GRSE) – Focus on smaller vessels, lower margins (~12–15%).
Cochin Shipyard – More diversified into commercial vessels, order book ~₹22,000 cr.
Global Peers:
Hyundai Heavy Industries (South Korea), Daewoo Shipbuilding – higher commercial exposure, lower defense visibility.
MDL is unique: pure-play defense PSU with zero debt, high visibility order book, and strong profitability.
10. Technicals & Portfolio Weightage
Current Price: ₹2,670
Technical Weight: 0.34% | Strategic Weight: 0.75%
Factor score: 0.46
Long-term investors can allocate 0.75–1% portfolio weight, with staggered accumulation on dips near PBV ~4–5x.
11. Risks
Project execution delays (complex naval platforms).
High dependence on Indian Navy (80%+ revenues).
Margin volatility due to provisioning & cost escalations.
Global competition in exports (Korean & European shipyards).
12. Conclusion – Long-Term Risk & Reward
Mazagon Dock stands as a strategic national asset and a rare defense PSU growth story. Backed by:
Strong order book visibility,
Navratna status giving autonomy,
Expanding exports & international acquisition,
Consistent profitability & dividends,
MDL offers long-term compounding potential. However, given the steep re-rating (PE 42–73x FY26), investors should accumulate gradually, focusing on long-term (FY30–FY35) horizon.
Verdict: ⭐ Buy on Dips | Long-term Hold till FY2035
13. Disclosure
This blog is for educational purposes only, intended to provide insights to investors. It should not be considered investment advice.
