Why Mazagon Dock Shipbuilders Share Price is Rising

Incredible (according to the dictionary): too extraordinary and improbable to be believed.

Incredible (according to the investment world): delivering a staggering 335% return in just one year!

This is the story of Mazagon Dock Shipbuilders, a company whose share price has defied all odds. Since its listing in October 2020, the stock has rallied 3,100%.

Yes, you read that right. It was listed at a humble Rs 173 and today it has skyrocketed to an all-time high of Rs 5,859.9. Yesterday its marketcap crossed the Rs 1 trillion (tn) mark.

Fuelled by the government's unwavering focus on achieving self-reliance in the critical defence sector, Mazagon Dock Shipbuilders has been on an upward trajectory. And the good news doesn't stop there - the rally continues.

In the past month alone, the stock price has surged another 103%.

What's driving this incredible recent surge, and will this momentum continue?

Let's delve deeper and explore the factors propelling Mazagon Dock Shipbuilders towards uncharted territory.

#1 Upcoming Events Building Expectations

Mazagon Dock Shipbuilders share price is experiencing a significant rally due to multiple factors.

There have been substantial inflows from new defence-specific mutual funds, which have targeted investments in companies like Mazagon Dock.

This influx of capital is driven by investors looking to capitalise on the promising future of the defence sector. The company's strong position in this sector makes it an attractive investment.

Expectations are high for the forthcoming budget, with investors anticipating a notable increase in defence spending.

This anticipated boost in budget allocation is expected to benefit companies involved in defence manufacturing, including Mazagon Dock. The potential for increased orders and contracts from the government is creating a positive outlook among investors.

Additionally, there is speculation that the company might report better-than-expected quarterly results.

The company's recent financial performance has already shown improvement, and investors are optimistic that this trend will continue. This anticipation of strong results is further driving up the share price.

These factors have combined create a bullish sentiment around Mazagon Dock Shipbuilders.

Strategic investments, positive government policy expectations, and strong company performance metrics are all contributing to the rally.

#2 The Navratna Status

On 25 June 2024, Mazagon Dock Shipbuilders announced it had been granted 'Navratna' status. This status elevates the company's role in the economy and enhances its prestige among public sector undertakings, both domestically and globally.

With this designation, Mazagon Dock now has greater autonomy. It can make decisions on capital expenditure, investments in joint ventures or subsidiaries, and human resources management without needing extensive government approvals.

Specifically, as a Navratna company, Mazagon Dock can invest up to Rs 1,000 crore or 15% of its net worth in a single project independently.

This new level of authority also enables the company to engage in joint ventures, form alliances, and establish subsidiaries overseas.

The announcement of the Navratna status boosted investor confidence significantly.

#3 Kalvari Class Submarine Deal

Reportedly talks are advancing on acquiring additional Kalvari-class (Scorpene) submarines for the Navy.

Mazagon Dockyard is in advanced discussions for a potential Rs 350 billion (bn) deal. This deal aims to enhance India's underwater capabilities.

The new submarines, three additional Kalvari-class, will be larger and equipped with modern electronics. These enhancements will provide better strength and longer endurance.

Technological advances in propulsion will also be included, allowing these submarines to travel further than their predecessors.

Last month the company submitted a detailed techno-commercial bid to the defence ministry. The ministry has promised at least 60% indigenous content in the new submarines. This means a significant portion of the work will go to Indian suppliers and the MSME sector.

The final price will be determined after negotiations between MDL and the ministry. The deal could be valued at around Rs 350 bn. This order is expected to create close to 5,000 jobs and keep a major part of the contract value within India.

The high percentage of indigenous content will also lead to significant technology transfer. This could pave the way for future submarines to be fully designed and manufactured in India.

Currently, the company is constructing the Kalvari class of submarines under Project 75 with French assistance. The sixth and final one is likely to be delivered by the end of this year.

The additional submarines, as per its proposal, can be delivered within six years. This will address the Navy's urgent requirement for conventional submarines, as the current fleet of Russian-origin Kilo class boats are nearing the end of their service life.

The anticipated deal and the resulting operational enhancements have boosted investor confidence.

How Mazagon Dock Shipbuilders Share Price has Performed Recently

In the past five days, Mazagon Dock Shipbuilders share price has rallied 31.5%. In the last month, it is up 103.8%.

In 2024, so far its share price has surged 149% and its up 337.6% in the last one year.

The stock touched its 52-week high of Rs 5,859.9 on 5 July 2024 and a 52-week low of Rs 1,281 on 7 July 2023.

About Mazagon Dock Shipbuilders

Mazagon Dock is engaged in manufacturing warships, submarines, cargo, and passenger ships for the defence sector. It also undertakes ship repairing activities for its clients.

It primarily manufactures for the defence sector and has built 802 vessels including 28 warships ranging from advanced destroyers to missile boats and 7 submarines.

The company is looking forward to diversifying its activities and increase presence in the field of underwater equipment and platform, marine equipment and platform, heavy engineering equipment, offshore platform etc.

It has also penetrated into a new segment i.e. manufacturing of cargo containers and has successfully bagged orders of 2,500 containers from Container Corporation of India Limited.

To know more, check out Mazagon Dock Ship's financial factsheet and latest quarterly results.

You can also compare Mazagon Dock Shipbuilders with its peers on our website:

Mazagon Dock Shipbuilders vs Cochin Shipyard

Mazagon Dock Shipbuilders vs Garden Reach Shipbuilders

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...