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Mazagon Dock Shipbuilders Ltd (MDSL), incorporated in 1934, is a 'Mini-ratna-I' public sector undertaking under the Department of Defence Production, (MoD). Headquartered in Mumbai, the core capabilities includes construction & repair of warships, submarines for Indian Navy and other vessels for commercial clients. With a capacity of 40,000 Dead Weight Tonnage (DWT), MDSL is India's only shipyard to have built destroyers and conventional submarines for the Indian Navy and is also first shipyard to manufacture Corvettes (Veer and Khukri Class) in India. Since 1960, MDSL built 795 vessels including 25 warships, destroyers, missile boats & 3 submarines.
- Strategically located at busy maritime route connecting Europe, West Asia and pacific.
- A key player in defence ship building, is currently building four P-15 B destroyers and four P-17A stealth frigates.
- The submarine and heavy engineering division is in the process of delivering four Scorpene class submarines.
- Has a technology transfer agreement with French Naval Group, for Scorpene submarines.
- Exploring possibilities of developing a greenfield shipyard at Nhava, Navi Mumbai to revive ship repair operations.
- Current order backlog is Rs.540,74cr, 10x FY20 sales provides a strong visibility.
- For FY18-20, revenue grew at a CAGR of 6% while PAT de-grew by 2% CAGR. In FY20,MDSL reported PAT of Rs.477cr on revenue of Rs.4,978cr.
- New Defence procurement policy 2020, is expected to accelerate indigenization, which is positive for the domestic defence industry.
- At the upper price band of Rs.145, MDSL is available at a P/E of 6.1x which is significant discount to its peers. Considering strong technological & execution capabilities, healthy order book and attractive dividend yield, we assign a subscribe rating for this IPO.