Mazagon Dock Shipbuilders Limited is a PSU, company started its operation back in 1774 and it was incorporated into Private Limited Company in 1934 and then acquired by government in 1960. Today MazDock is one of the leading shipbuilding yards in India. Over the journey of 259 years MazDock has transformed from a one unit ship repair company to multi unit, multi Product Company and is only Indian shipyard that has developed destroyers and conventional submarines for Indian Navy.

MazDock’s Business

• MazDock is India’s leading shipbuilding company with wide range of products and services to offer. Till date company has delivered 802 vessels which include 28 warships, and they have also delivered 7 submarines

• Company has two business divisions (i) Shipbuilding and (ii) Submarine and Heavy engineering. Under these divisions company offers a wide range of products and services.

• (i) Shipbuilding – This division is focused on building and repair of naval ships. (ii) Submarine and heavy engineering division build, repair and refit diesel electric submarines for ministry of defense.

•  MazDock’s product portfolio has three categories – 

•  Services under which company have seven different categories – 
• Repairs and refit 
• Designing of ships
• Know how provider
• Training
• Tug support
• Supply chain management
• Self propeller modular Transport

• MazDock’s Revenue Mix – 

Strong Industry Outlook

• Battle force ship market is expected to be fastest growing segment in the sea based defense equipment at a CAGR of 10% during 2021-26.
• Indian government is committed to strengthen the defense capabilities and allocating budgets to this sector accordingly. GoI has a vision of defense production of $25 billion including $5 billion export from defense and aerospace by 2025.
• Government has planned huge expenditure for modernization of defense sector. In coming 5-7 years GoI has planned to invest around $130 billion for this ambition.
• In coming years focus of this sector will also be on exports as government has big ambition of “Buy Global – manufacture in India”. Defense exports have already grown by 334% in last five years and now India is exporting to 75 countries.

Peer Comparison

Strong Growth Plans

• MazDock is planning to develop a green field shipyard at its Nhava Yard. Company owns 37 acres of land and a shipyard is planned to be developed in phased manner to facilitate future orders.
• Company will build a new floating dry dock of 12000T capacity for construction of advanced and next generation vessels.
• Company will focus on export market and for that they are in talks with various Indian Embassies abroad. And company is participating in global tenders issued by different countries.
• Company is shortlisted as one of the strategic partner for development of future submarine project P 75(I).
• Mazdock has received Rs. 1614 Cr. Orders from Ministry of Defense for building six next generation offshore patrol vessels.

Key Performance Indicators for MazDock

Increment in Gross Block

High Cash flow from operations

Growing EPS

Financial Performance

Revenue – MazDock has reported strong growth in revenue from operations, which indicates expansion of operations.

EBITDA – EBITDA has almost doubled since last year which reflects aggressive approach and increased operational efficiency.

ROCE – Impressive returns are generated by company over years and current year returns are exceptional.

Shareholding Pattern – Company is a PSU and of strategic importance to the nation, hence majority stake is owned by GoI, but as FDI is promoted and allowed in defense sector in recent time FII has increased their holdings.

SWOT Analysis 

Strengths-

• Company is located at busy international maritime route which provides significant advantage.
• Company has significantly reduced debt and now it is almost debt free.
• Company is witnessing a rise in their order book and expected to reach previous high.

Weakness – 

• Company is operating in a high capital intensive industry.
• Dependency on foreign sources for equipment, weapons, sensors and Propulsion system.
• Manufacturing of products is complex and involve some hazards.

Opportunities – 

• Inland waterways traffic is expected to go up by 15 xs in next 20 years.
• GoI has set aside Rs. 40 Billion for financial assistance to shipbuilders.
• Company is a strong contender for future projects of Indian Navy.

Threats –

• Company has obligation to complete certain projects timely and are subject to termination if delayed.
• Company is dependent upon budget allocation on defense sector any delays or reduction in allocation can directly affect companies operations.

Conclusion – 

• MazDock has a diverse product portfolio which gives them an edge over competition but as they are in capital intensive business only optimum utilization of capital will help them in future success.
• Defense sector has huge potential and can see exponential growth in coming years, company need to use this opportunity effectively to keep on generating returns.
• The low level of debt and high cash from operations opens many doors for company.
• Mazagon Dock has a PE of 28.20 against the industry average of 31.07.

Note – Some parts of data reflected in report is taken from following sources – 

• Annual Reports & company website

• BSE India & IBEF

  -Team Icore