Mazagon Dock Shipbuilders Limited

Mazagon Dock Shipbuilders Limited reported a strong Q2 FY26 standalone performance with revenue from operations at ₹2,929 crores. Standalone PAT grew by 27% YoY to ₹715 crores, and total income increased by 6% YoY to ₹3,205 crores. Consolidated PBT for the quarter was ₹934 crores, up 26% YoY, with consolidated net worth growing 22% YoY to ₹8,910 crores. However, H1 FY26 standalone PBT and PAT saw an 8% decline compared to the previous year, primarily due to ₹1,000 crores of provisions made for onerous contracts in Q4 FY25 and Q1 FY26.

The company's current order book stands at approximately ₹27,415 crores. Management provided a strong outlook for future order inflows, targeting an order book in excess of ₹1 lakh crores by FY27. The pipeline includes significant defense projects such as the P75I submarine project (₹79,000 crores), Landing Platform Dock (LPD) project (₹35,000-40,000 crores), Mine Counter Measure Vessels (MCMV) (₹40,000 crores), 17 Bravo ships (₹50,000-60,000 crores), and a Destroyer class project (₹70,000-80,000 crores). Additionally, short-cycle commercial projects worth around ₹1,000 crores are anticipated from PSUs like Shipping Corporation of India, ONGC, and IOCL.

Mazagon Dock is actively pursuing diversification to reduce its 80-90% dependence on the Indian Navy. This includes venturing into commercial shipbuilding, highlighted by the ongoing acquisition of Colombo Dockyard, which is expected to be completed by early November with a ₹450 crore outflow for 100% shareholding. The company plans to ramp up Colombo Dockyard's revenue from ₹1,000 crores to ₹1,500 crores in the next year. Furthermore, MDL has signed an exclusive MoU with Swan Shipyard (SDHI) to jointly bid for the LPD project, leveraging Swan's large infrastructure for efficient construction.

The company has outlined substantial capex plans. For FY26, a capex of ₹500 crores is anticipated, primarily for the completion of the floating dock. An additional ₹1,000 crores is planned for infrastructure upgrades at Nhava and South Yard Annex to remove production bottlenecks, and another ₹1,000 crores for P75I submarine infrastructure. A major long-term investment involves setting up a greenfield shipyard in Tuticorin, with an estimated total investment of ₹15,000-18,000 crores over various phases, with the first phase costing around ₹5,000 crores over the next 3-4 years, targeting a capacity of 1-1.5 million tons for VLCCs, platform support ships, and MR tankers.

Management indicated that while margins for new projects are expected to be in the range of 12-15%, overall stable margins are anticipated to be 15% plus. The company clarified that these are EBITDA margins, which translate directly to PAT and PBT due to minimal borrowings. The improvement in margins over the years (from 5% to 15% plus) is attributed to enhanced efficiency, quality of workmanship, and the ability to realize higher margins upon project completion when liabilities are settled.