Mazagon Dock's Q1 Margin Hits 27%, But Sustainability In Question: FY25 Forecast And Key Updates

Last updated on August 23rd, 2024 at 09:10 am

In an interview with ” CNBC-TV18 “, Mazagon Dock’s Chairman and Managing Director, Sanjeev Singhal, mentioned that the company’s profit margin before accounting for ” interest, taxes, depreciation, and amortization (EBITDA) ” is expected to stay between 11% and 12% for the financial year 2025. This means they anticipate their profitability to be steady at that level.

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Sanjeev Singhal said that the company has plenty of cash and doesn’t have any concerns about working capital or debt. They also earn a good amount of interest income from their investments.

” For their projects, they expect to make a reasonable profit margin of around 10 to 12%” .

Sanjeev Singhal added that for their repair projects and offshore work, they expect a profit margin of about 10-12%. He didn’t give specific numbers, but he considers this range to be a healthy margin for these projects.

For the June quarter, Mazagon Dock’s EBITDA margin increased significantly to 27.3%, up from 7.9% in the same quarter last year.

This improvement was due to a big drop in the cost of materials, which decreased from ₹1,433 crore to ₹1,106 crore. Additionally, the cost of base and depot spares fell sharply from ₹214.7 crore to ₹109.2 crore compared to the previous year.

In a note released on August 16, ICICI Securities predicted that Mazagon Dock’s profit margins will decrease once their current contracts are completed. The brokerage firm has given the stock a “sell” rating and set a price target of ₹1,165, suggesting the stock could drop by over 75% from its current price.

Sanjeev Singhal mentioned that Mazagon Dock’s order book is currently worth ₹40,000 crore and includes orders for 30 ships that need to be delivered over the next few years. The company is also anticipating new orders for three submarines, expected to be valued at ₹27,000 crore, in the near future.

The company’s Chairman and Managing Director, ” Sanjeev Singhal ” , is hopeful that new orders will come in before they complete their current projects.

” Mazagon Dock is also seeing good progress with the Project-75 (India) submarine and is optimistic about securing the order for it by December next year”.

Shares of Mazagon Dock Shipbuilders are currently up by 3.2%, trading at ₹4,439. Although they are lower than their peak of ₹5,860 reached on July 5, they have recovered somewhat today after falling for three days in a row.

Disclaimer: This information is for educational purposes only and not investment advice. Always consult with a financial advisor before making any investment decisions.

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