Mazagon Dock order book supports execution as naval contract pipeline drives long-term growth

Investment View and Valuation

ICICI Direct Research retains a BUY recommendation on Mazagon Dock Shipbuilders (MDL) with a target price of Rs 2,950, based on 35 times FY28E EPS. The broker says near-term growth is moderating, but the long-term opportunity remains intact.

MDL is the only public-sector defence shipyard constructing destroyers and submarines. It has capacity to build 11 submarines and 10 warships, including destroyers, frigates and other vessels, concurrently.

Order Book Supports Near-Term Execution

MDL had an order book of Rs 18,218 crore as of June 2026, equivalent to 1.4 times FY26 revenue. The backlog includes P-17A stealth frigates, P-75 Kalvari submarines, ICGS vessels, ONGC offshore platforms, submarine refits and other shipbuilding contracts.

ICICI Direct believes the order book provides healthy execution and revenue visibility for the next one to two years. However, the backlog has moderated over recent years because of healthy execution and limited fresh inflows. Timely award of large naval contracts is therefore the key trigger for the next growth phase from FY28E onwards.

Q1 FY27 Financial Performance

Reported Q1 FY27 consolidated revenue was Rs 2,943 crore, up 12.1 per cent year on year but down 23.6 per cent quarter on quarter, supported by execution across naval programmes. EBITDA rose 48.0 per cent year on year to Rs 447 crore, despite falling 17.7 per cent sequentially.

EBITDA margin improved to 15.2 per cent from 11.5 per cent a year earlier and 14.1 per cent in Q4 FY26, aided by a favourable execution mix and operating leverage. PAT increased 21.7 per cent year on year to Rs 551 crore, while declining 18.3 per cent quarter on quarter. The report does not state a comparison of these quarterly results with ICICI Direct estimates.

Long-Term Naval Opportunity Pipeline

ICICI Direct identifies a strong naval opportunity pipeline for MDL. The company is expected to partner Germany's ThyssenKrupp Marine Systems for Project-75(I), a Rs 90,000 crore-plus six-submarine programme, with an agreement likely to be signed shortly.

MDL could also benefit from the Next-Generation Corvette order, where Goa Shipyard is L2 and MDL holds a 47 per cent stake. Other potential opportunities include next-generation destroyers, frigates, support vessels, submarine refits and exports.

MDL's acquisition of a 51 per cent stake in Colombo Dockyard PLC is expected to provide access to commercial shipbuilding, ship repair and export markets, diversifying its revenue base. Cabinet approval for deep-water and offshore oil exploration could also create demand for offshore patrol vessels, survey vessels and rigs.

Earnings Outlook

ICICI Direct has trimmed its FY27E and FY28E revenue estimates because order inflows have been below expectations. Nevertheless, the broker forecasts revenue and PAT to grow at approximately 15 per cent CAGR over FY26 to FY28E, while EBITDA margin is expected to sustain around 15 per cent.

Key Risks

• Dependence on government contracts.
• High working-capital requirements.
• Availability of key raw materials and components.