Mazagon Dock Share Price Surges on Rs 1,486 Crore ONGC Contract

Mazagon Dock Shipbuilders Ltd., one of India's leading shipbuilding firms, has seen its share price surge significantly following the announcement of a major contract from Oil and Natural Gas Corporation (ONGC). The company's shares gained as much as 3.28% to hit an intraday high of Rs 4,545.05 per share on September 9, 2024.

The uptick in Mazagon Dock Shipbuilders' share price is attributed to the company being awarded a contract worth Rs 1,486.40 crore from ONGC for the Pipeline Replacement Project 8 Group A (PRP 8 Group A) on an EPC reimbursable basis (OBE). This contract includes all taxes and duties, with a GST of 12%.

Mazagon Dock Shipbuilders Limited, established in 1774 and based in Mumbai, has a rich history of constructing various vessels, including warships, submarines, cargo ships, and offshore platforms. The company specializes in the defense sector and has constructed 802 vessels to date, including 28 warships and 7 submarines.

With an infrastructure capable of handling multiple projects simultaneously, Mazagon Dock has established a dedicated 'Make in India' Department to focus on indigenization. Approximately 75% of the company's content is dedicated to warship construction, leveraging indigenous materials to significantly cut costs.

The market capitalization of Mazagon Dock Shipbuilders is Rs 88,664 crore, according to the Bombay Stock Exchange (BSE). The company falls under the BSE500 category and has no debt since the last five years.

In the last four years, only 3.13% of trading sessions saw intraday declines higher than 5%. The stock has given a 3-year return of 1574.01%, significantly outperforming the Nifty 100, which gave a return of 51.25%.

Analysts at Antique Stock Broking have maintained a 'Buy' call on Mazagon Dock, citing the company's plans for seven deliveries in the next two years and the potential for a larger order book. The defense PSU's order book, as of August 14, stood at Rs 40,400 crore.

Despite the recent surge, Mazagon Dock shares have been under pressure in the last two months, correcting nearly 25-30% from their record high of Rs 5,860 on July 5. The stock is currently undergoing a protracted consolidation phase.

For investors with a high-risk appetite, Mazagon Dock Shipbuilders presents an attractive opportunity. With a strong earnings visibility and focus on the defense sector, the stock is fairly valued at this point in time. A decisive close above Rs 4,800 could lead to further upside towards Rs 5,500 in the near term.

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