Government Selling 4.8% Stake, Stock Drops 7%. Floor Price Set at 8% Discount, 130% Return in One Year. Strong Order Book and Profits Attract Investor Attention.
Mazagon Dock Stock: Amidst discussions by former US President Donald Trump about increasing tariffs, global markets witnessed a decline. Indian stock markets were not untouched, and on Friday, widespread selling led to the Sensex and Nifty falling by about 1.25%. Defense sector PSU stocks were also affected by this decline, with Mazagon Dock being significantly impacted.
Sharp Decline in Mazagon Dock, Stock Plunges 7%
Following the government's announcement of a stake sale through an Offer For Sale (OFS), Mazagon Dock's share price plummeted by up to 7% in the initial trading session. The government is selling a 4.8% stake in this defense company, which is significant news for investors. However, this stock has delivered over 130% returns in the past year, making it a multibagger.
Floor Price Set at 8% Discount
Mazagon Dock stated that the government will sell 2.83% stake directly and an additional 2% through a green shoe option. The floor price for this sale has been set at ₹2,525, which is approximately an 8% discount to the previous closing price of ₹2,735. The OFS will open for retail investors on April 7th (Monday). The government expects to raise approximately ₹5,000 crore from this deal.
Mazagon Dock Remains a Multibagger, 1770% Return in Three Years
Mazagon Dock's share has been among the top performers in the PSU sector.
3 Years: 1770% Return
2 Years: 670% Return
1 Year: 130% Return
Year-to-date 2024: 14% Gain
Since its listing on BSE and NSE in September 2020, this stock has consistently remained in the spotlight. Last year, the company announced a bonus share issue in a 1:2 ratio, leading to significant buying before the record date.
Mazagon Dock's Valuation and Peer Comparison
However, the stock's P/E (Price-to-Earnings ratio) of 38.65 cannot be considered cheap, but it is lower compared to competitor companies.
Cochin Shipyard: P/E 44.47
Garden Reach: P/E 47.47
Zen Technologies: P/E 61.66
In this context, Mazagon Dock appears relatively cheaper.
Why is Mazagon Dock in Focus?
1. Strong Profit and Increasing Revenue
Mazagon Dock is a profitable government company. In the December 2024 quarter, the company's profit increased by 29% (YoY) to ₹807 crore, while revenue increased by 33% to ₹3,144 crore.
Company Profit in the Last Four Quarters:
Q1: ₹585 crore
Q2: ₹696 crore
Q3: ₹663 crore
Q4: ₹627 crore
2. Strong Order Book and New Projects
According to brokerage reports, Mazagon Dock has qualified to supply 6 units of P75-I submarines. If this order is received, the company's order book could exceed ₹50,000 crore.
Furthermore, an order worth ₹25,000 crore for 3 Scorpenes class submarines is also in the pipeline. If these orders are received, the company's order book could reach ₹1.1 lakh crore.
3. Large Deal with the Indian Navy and Increase in Defense Budget
Recently, the Indian Navy signed a deal worth ₹36,000 crore with Mazagon Dock. Furthermore, India's defense capex budget has increased by 12.9%, now reaching ₹1.8 lakh crore. This is expected to lead to new projects for the company.
4. Increased Importance Due to Navratna Status
Mazagon Dock received "Navratna" status in June 2024, granting the company greater autonomy and the capacity to secure larger projects.
