Mazagon Dock Shipbuilders IPO: Brokerage Views

This post on Mazagon Dock Shipbuilders IPO attempts to bring out consolidated brokerage views , subscription information, Grey Market Premium (GMP) and anchor investor information where applicable. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Mazagon Dock Shipbuilders IPO or not.

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Mazagon Dock Shipbuilders IPO: Grey Market Premium etc.

  • 28-09-20 GMP 130

Subscription: Mazagon Dock Shipbuilders IPO ( x times)

Day / X timesQIBNIIRetailempTotal 
Day 389.71678.8835.633.88157.41
Day 22.834.9615.531.047.52
Tot Applications  ~ 2631972
Appl wise Retail25.60 x

Consolidated Brokerage Views on Mazagon Dock Shipbuilders IPO

Angel Broking :”Subscribe: In terms of valuations, the pre-issue P/E works out to 6.1x FY20 earnings (at the upper end of the issue price band), which is lower vs. peers like Garden Reach Shipbuilders and Cochin Shipyard (trading at 12.2x and 6.6x of its FY20 earnings, respectively). Further, MDSL has healthy ROE of ~16% coupled with highest dividend yield (7.4%) and higher cash on balance sheet among its peers. Hence, considering the above positive factors, we recommend SUBSCRIBE to the issue with a long-term horizon”

Capital Market : ” Score 48/100 ; Consolidated revenues were up by 8% to Rs 4977.65 crore in FY 2020. But with the operating profit margin (OPM) contracting by 30 bps, the growth at operating profit was restricted at 3% to Rs 267.97 crore. After accounting for lower other income, higher interest and higher depreciation, the PBT was down by 4% to Rs 747.69 crore. Hit further by higher EO expense and higher taxation, the PAT was down by 18% to Rs 383.69 crore. The company has opted to adopt new reduced income tax rate under Section 115BAA and this has resulted in one time adverse effect on profit for the year by Rs 160.73 crore due to reduction in deferred tax assets. But gained by higher share of profit from associate, the fall in net profit was down by 10% to Rs 477.06 crore. The consolidated EPS for FY2020 stood at Rs 24. At the price band of Rs 135-145, the P/E works out to 5.6-6.The nearest comparable listed players CSL and GRSE quotes at a PE of 6.7 and 11.6 times their FY20 EPS. The current order book of MDL is 11.7 times of FY20 revenue compared to 4.2 times for CSL and 18.5 times for GRSE. “

Choice Broking: “At the higher price band of Rs. 145 per share, MDSL’s share is demanding a P/E multiple of 6.1x, which is at discount to the peer average of 9.3x. Based on the margin profile and return ratios, we feel that the asked valuation is justified. Defence manufacturing has huge potential in the long run and with sector liberalization, the company may have some concerns in the long run but not in the medium term. Considering the performance of defence companies post listing, we assign an “Subscribe with Caution” rating for the issue.”

Geojit: “Subscribe: The Indian shipbuilding industry comprises eight public sectorshipyards out of which four naval shipyards come under the purview of India’s Ministry of Defence, namelyHindustan Shipyard Ltd(HSL), Mazagon Dock Shipbuilders Ltd(MDSL), Goa Shipyard Ltd(GSL)and Garden Reach Shipbuilders &Engineers Ltd.(GRSE).MDL and GRSE are engaged in building complex weapon-intensive vessels such as destroyers, stealth frigates and corvettes. GSL and HSL have the capability to build various categories of vessels, such as patrol vessels, tankers, landing platform docks, survey vessels, tugs and barges. MDL is also constructing submarines for Indian Navy.The majority of ship orders for clients engaged in the defence sector are with public sector players.”

ICICIDirect: “Considering the strong order book, superior infrastructure facilities, debt free status, one can expect better growth outlook for the company in the long run. At the higher end of the price band of Rs 145, the stock is available at a P/E of ~6.1x (on post issue basis). We recommend SUBSCRIBE on the issue with a view of listing gains.”

KR Choksey: At the price band of Rs345-350, the Mazagon Dock Shipbuilders issue comes priced at a PE of 18.2x-18.5x annualised 1QFY21 EPS. This appears to be reasonable, given the healthy growth being witnessed by the firm, its strong clients relationships across the board including with enterprises, MNOs and OTT operators, diverse client base across industry verticals, good financial track record and highly experienced promoter team. Given the impressive performance in 1QFY21, we believe there is a high probability of the company continuing to record impressive growth. We this recommend a SUBSCRIBE to the issue, with the potential for healthy listing gains.”

Mehta Equities: “Considering attractive valuations and the objective of the issue which is to carry out the disinvestment of equity shares by the selling shareholder constituting 15.17% (OFS) paid up equity share capital and Mazagon will not receive any proceeds from the Offer, Hence we recommend investors to go “Subscribe for listing gain“.

Nirmal Bang : “MDS commands a monopoly status in high value segments like submarines and destroyers (just one competitor in destroyers). Also, until now MDS has been the only player capable of manufacturing large ships with Garden Reach Shipbuilders having recently emerged in this segment. The positive factors aiding healthy prospects for MDS include – indigenization push by GoI, a wide product portfolio, robust order book to sales of 10.9x, rising share of the fast growing shipbuilding business (70% vs. 33% in FY17), long credible history of proven development capabilities, strong balance sheet and healthy return ratios. MDS is being offered at an attractive valuation of 4.5x FY20 EPS vs. 9-10x commanded by other listed defense PSUs having similar financial metrics. Thus we recommend ‘subscribe’ to the issue.”

SMC: “Score 3/5 ; Mazagon Dock Shipbuilders is a defence public sector undertaking shipyard under the Department of Defence Production (MoD) with a maximum shipbuilding and submarine capacity of 40,000 DWT. It constructs and repairs warships and submarines for use by the Indian Navy and other vessels for commercial clients. It is India’s only shipyard to have built destroyers and conventional submarines for the Indian Navy, besides being one of the initial shipyards to manufacture corvettes (or small warships). The company has a healthy order book worth Rs. 54000 cr. which is to be executed in the next six to seven years.”


Standard disclaimer: I am not a SEBI registered analyst /investment adviser and above infoimration is collated from various online sources and is for educational purpose only. Please visit indidivual brokearge sites to read the actual reports. Please donot make ypur investkent decisions based on this info as it is not completre amd exhaustive. Please do your own due diligence as stock market investments have high degree of inherent risk.

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