Mazagon Dock Expects Healthy Margins And Strong Orders Through FY25

Mazagon Dock Shipbuilders Ltd. expects stable margins and strong revenue growth through fiscal year 2025, boosted by key defence projects and significant expertise gains, according to Chairman and Managing Director Sanjeev Singhal.

Following a stellar second-quarter performance, where net profit surged 76% year-on-year to Rs 585 crore, beating Bloomberg analysts' expectations of Rs 489 crore, Mazagon Dock is confident in its growth trajectory.

Revenue for the quarter rose 51% to Rs 2,757 crore, surpassing the projected Rs 2,148 crore, as operating expenses narrowed significantly to 81.5% of revenue from 90.3% a year prior. The company’s board declared an interim dividend of Rs 23.19 per share.

Singhal shared that the company is anticipating revenue growth of 10-12% for fiscal 2025 and 2026, driven by continued high demand. 

“We’re targeting 12-15% growth for fiscal 2025 and 2026, and we don’t see any downside to this revenue guidance,” he said. “Our margins are expected to remain on similar lines in the next half, with a product mix largely unchanged for fiscal 2025.”

The company is set to earn approximately Rs  7,000–8,000 crore in revenue from a major ONGC project this fiscal year. Mazagon Dock's order book growth is also expected to match the revenue pace, with Singhal targeting a 12-15% increase in the current fiscal. “We’re ensuring consistent 12-15% growth,” he said and added that margins could trend on the higher side of the range.

One of the significant projects on the horizon for Mazagon Dock is the Scorpene submarine order, currently in advanced discussions with the Ministry of Defence. “Securing this order would provide us with a steady execution pipeline,” said Singhal. “It’s nearly as large as our existing order book, and we hope to finalise it soon.”

Singhal also spoke about Mazagon Dock’s success in delivering the P-15 Bravo class destroyers ahead of schedule. “Out of the four, we’ve delivered three already, with the second and third completed ahead of schedule,” he shared. “The final one is expected by December 31, two months ahead of its February deadline. Over the years, we’ve gained significant expertise and made remarkable progress.”

Reflecting on the provisions made last year, Singhal noted that the company created Rs 207 crore provisions for the Alpha projects, impacting margins. “If we set aside those provisions, the margins for the same period last year and this September quarter would be on similar footing,” he said. Singhal noted that a 12-15% margin is healthy according to industry standards, adding, “I believe our margins will stay robust this year and next.”

Mazagon Dock stock rose as much as 3.10% on Wednesday to Rs 4,327.95 apiece on the NSE.

Two out of the four analysts tracking Mazagon Dock have a 'buy' rating on the stock, one recommends a 'hold' and one suggests a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential downside of 15.8%.