Buy Mazagon Dock Shipbuilders Ltd for Target Rs.3,100 by Choice Institutional Equities
INR 1 Tn: 4x Order Book Expansion Secures Decadal Visibility
We believe that MAZDOCKS is entering a structural upcycle anchored by India’s naval expansion and a visible pathway to an INR-1 Tn order book by FY27E. Starting from a strong base of ~INR 205 Bn (1.6x book-to-bill), the backlog is set to compound through high-probability awards, led by the P-75I submarine programme (~INR 700 Bn), alongside upcoming Project 17B frigates and next-generation destroyers. Incremental diversification via ONGC orders and early export opportunities further de-risks execution with a clear path to sustained value creation over the next 5–7 years.
INR-200 Bn Capex to Command India’s Naval Future
MAZDOCKS is entering into a transformative, capacity-led phase, backed by ~INR 65–70 Bn capex over 3–5 years and ~INR 200 Bn long-term. In the medium-term, it aims to double the deadweight capacity, while the 37-acre Nhava Yard enables next-generation aircraft carriers and large commercial vessels. Mumbai yard upgrades, including P-75(I) infrastructure, enhance submarine throughput and support air-independent propulsion (AIP) submarines. The greenfield Tuticorin yard expands into VLCC-class shipbuilding. Collectively, these initiatives strengthen diversification, multi-year visibility and operational flexibility, positioning it as a low-risk, multi-decade beneficiary of India’s naval modernisation
Commercial Shipbuilding Optionality in a USD-231 Bn TAM by 2035
We believe India’s participation in global commercial shipbuilding is structurally misaligned with its trade footprint. Despite handling ~95% of merchandise trade by volume and operating a ~7,500 km coastline, India accounts for less than 1% of global cargo vessel ownership – reflecting chronic underinvestment rather than demand or capability constraint. This imbalance heightens freightcost volatility and supply-chain risk, reinforcing the strategic case for domestic capacity creation. With the global shipbuilding TAM expanding from USD 164 Bn in 2026 to USD 231 Bn by 2035, our scenario analysis indicates that raising India’s share to 3%, 5% or 10% can unlock incremental revenue opportunities of ~INR 120 Bn, ~INR 200 Bn and ~INR 450 Bn, respectively, for the company. We see MAZDOCKS as the best-positioned beneficiary, enabling commercial ship
Investment View
We initiate coverage on MAZAGON, a leader in India’s defence shipbuilding with strong execution in complex platforms, particularly submarines, supported by a robust order book stands at INR 205 Bn (~1.6x FY26 rev.), providing healthy revenue visibility. We expect the company to deliver Revenue /EBITDA/PAT CAGR of 16.0%/18.6%/17.7% over FY26–29E, driven by steady execution, operating leverage and improving mix. We assign a ‘BUY’ rating with a target price of INR 3,100, implying 28.7% upside. Our valuation is based on 35x PE on FY28E EPS of INR 88.2, implying a PEG ratio of 2.2. We have used DCF for sanity check, which implies fair value of INR 3,090. Key Risk: Heavy reliance on large programs and MoD ordering cycles makes growth and earnings sensitive to project timing and execution milestones. Upcoming Trigger: Order pipeline P-75I (INR 700Bn) & P-15B (INR 800Bn)
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SEBI Registration no.: INZ 000160131
