📌 At a Glance

FY25 revenue surged to ₹11,432 Cr, net profit soared past ₹2,414 Cr, and Mazagon Dock’s EPS now sits at ₹59.83. This is the kind of PSU that makes fund managers say, “Maybe we don’t need IT stocks after all.”

But with 56x P/E and 17x book value, the question is:

👉 Is it too late to board this ship?

🛠️ About the Company

• Founded: 1774 (yes, before your great-grandfather’s grandfather was born)
• HQ: Mumbai Dockyard
• Specialty: Warships, Submarines, Stealth Frigates
• Clients: Indian Navy, Coast Guard, and now global export contracts

This isn’t your average PSU — it’s India’s only Navratna shipbuilder capable of manufacturing destroyers, submarines, and corvettes under one roof.

Mazdock is what BHEL thinks it is, but never became.

📊 5-Year Financial Highlights

🚀 FY25 Highlights

• Revenue crossed ₹11,000 Cr for the first time ever
• Net profit up 24% YoY, touching ₹2,414 Cr
• Operating margin at 18%, up 300 bps
• ROCE remains best-in-class at 43%
• Order book visibility till FY30 thanks to frigates, destroyers & submarines

Mazagon’s balance sheet is cleaner than SEBI’s inbox after Holi.

⚠️ Other Income – Blessing or Bubble?

₹1,121 Cr of FY25 profit came from “Other Income” — that’s 46% of net profit.

Breakdown (as per past years):

• Treasury returns on advance payments from MoD
• Short-term investments (GoI bonds, MF, T-bills)
• Interest on milestone-linked cash flows

Not shady — but not core either.

So yes, they earn interest while the Navy is still debating design specs.

💣 Why the Market Is Obsessed With MDL

• Only Indian company that builds both submarines and frigates
• No real domestic competitor (Cochin Shipyard doesn’t touch submarines)
• Indian Navy plans 3x more submarines + destroyers under Mission Raksha Shakti
• Strategic PSU positioning: Make-in-India + Defence CapEx Boom

It’s the PSU version of NVIDIA: government orders = unlimited visibility.

📉 But Wait, the Valuation?

• CMP ₹3,369
• P/E = 56x
• Price / Book = 17.1x
• Dividend yield = 0.43%

That’s… not PSU pricing.

This is priced like a growth stock on steroids. Even HAL trades cheaper.

🧮 Fair Value Estimate (EduAssumption FY26)

Assume FY26 PAT = ₹2,800–₹3,000 Cr
Realistic P/E band = 25–35x (assuming cooling off in PSU rally)

➡️ Market Cap Range: ₹70,000 – ₹1,05,000 Cr
➡️ With 40.36 Cr shares: FV Range = ₹1,735 – ₹2,600/share

👉 CMP ₹3,369 = 🚨 Overheated based on FY26 estimates
(Market is pricing FY29 earnings already.)

⚔️ EduInvesting Verdict

Mazagon Dock is the PSU of this decade — a rare combo of:

• Steady government orders
• High margin defence contracts
• Bulletproof balance sheet
• Clean management (almost boringly efficient)

But… stocks aren’t warships. They move faster. And MDL has already 6x’d in 3 years.

Would we buy now? Only if there’s a meaningful correction.

🔎 Moat Analysis

• Tech Capability: Only yard with submarine + warship + stealth expertise
• Infra: Own drydocks + long-term MoD contracts
• Client Stickiness: Indian Navy has nowhere else to go
• Regulatory Shield: Strategic PSU status = immunity from free market chaos

📦 Risks

• Order delays from MoD are common
• High dependence on 1 client (Govt of India)
• Execution risks on complex defence projects
• Spike in employee cost due to PSU wage revision
• Other income dependency inflates PAT

📈 Future Triggers (FY26+)

• New submarine project (P-75I) allocation
• Foreign collaboration with Germany or France
• Export orders to Southeast Asia & Africa
• More stealth destroyers (Project 18 likely in FY27)
• Private defence offset partnerships

📉 What to Watch

• Core EBITDA vs Other Income trend
• EPS growth minus treasury impact
• Dividend policy revision — will the govt start milking the cash cow?
• PSU sector momentum cooling off?

Author: Prashant Marathe
Date: June 10, 2025
Tags: Mazagon Dock, Defence PSU, FY25 Results, Submarine Builder, EPS Multibagger, Overvalued PSU