Mazagon Dock investors should not get swayed by narrative and newsflow
Mazagon Dock Shipbuilders Ltd's shares rose 5% on Tuesday to ₹3,306. This is the first significant bounce after the stock dropped almost every day from its all-time high of ₹3,775 seen in May, just before the dismal March quarter (Q4FY25) results were declared.
What might have rekindled some interest in the stock is JM Financial's note indicating a medium probability that the stock may be included in the MSCI India Index. The index rebalancing may be announced on 7 August.
Investors must be cautious of the news flow and narrative surrounding the Mazagon stock, which is being viewed as a defence sector play. However, this does not necessarily mean superior profitability versus the global shipbuilding industry. Management has clarified that their sustainable profitability margin will be in line with the global shipbuilding industry at about 15% at the profit before tax (PBT) level.
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Management has guided for about 10% growth in revenue for FY26, which comes to about ₹12,500 crore and PBT of ₹2,000 crore based on the margin guidance. After accounting for corporate tax at 25%, net profit after tax should be about ₹1,500 crore. But it must be noted that Mazagon's PBT margins for FY25 and FY24 are in the range of 23-24%, far above the guidance of 15%. So, it is likely that the company may well report higher margins in FY26, too.
Nirmal Bang Institutional Equities has estimated Mazagon's FY26 net profit at ₹2,904 crore. At the current market capitalization of ₹1.3 trillion, this translates into a price-to-earnings ratio of around 45x, which isn't cheap. Perhaps then, the Street is looking at a narrative of how the order book is going to expand multifold.
No guarantees
Mazagon expects the order book to grow from ₹32,000 crore at FY25 end to ₹1.3 trillion by FY26 on the back of contracts for additional submarines in the Project 75-AS and Project -75 (I) categories. The order book to annual revenue ratio translates into almost 10x FY25 sales, which means strong revenue visibility.
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Mazagon has the technical capabilities to execute a large order book. But it does not guarantee healthy profitability, going by the recent history of provisioning for losses in certain contracts. The company anticipates losses in the contracts for the supply of fast patrol vessels (FPV) to the Indian Coast Guard and also to Denmark. As a result, its provisions have jumped up to ₹747 crore in FY25 from ₹169 crore in FY24. The extent of actual loss will be reviewed in the future, and the provisions will be adjusted accordingly.
Amid this, Mazagon continues to focus on the profitable segment of submarines, wherein it has expanded capacity from the construction of 6 submarines to 11. Besides submarines, it will also be able to build 10 major warships as it has acquired land for ship projects. The additional facilities would require capital expenditure of ₹4,000 crore.
Even though Mazagon has an agreement with the US Navy for repairing ships, it does not have the infrastructure to handle large ships. So, it will only look for contracts to repair ships that are compatible in size with its shipyard.
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More order announcements are likely in the future, but there could be a long gap before order wins translate into actual revenue. For e.g. the delay in the design and finalization of submarine models would mean Project 75-AS revenues would begin reflecting in revenue only in FY28.
Investors would do well to ignore the noise and focus on the valuation that captures most of the near-term positives.
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Financial challenges When a child wants to pursue a sports career, the immediate concern for parents is financing the journey so that he can avail of the best training. While the initial costs at the recreational level of play are low and manageable, the sudden jump in expenses when he transitions to professional training comes as a Kolkata-based tennis aspirant, Krishnav Jhunjhunwala, 15, first picked up a tennis racket at 6-7 years, the cost was barely Rs.5,000-6,000 a month, including his coaching fee and gear expenses. After initiating professional training at 10-11 years, the expenses shot up nearly 10 times to Rs.50,000-60,000 a month. 'The coaching fee itself has gone up from Rs.3,000 to Rs.15,000, while the beginner rackets that cost Rs.4,000-6,000 have been upgraded and are much more expensive,' says Ashish, Krishnav's father. 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If he doesn't reach the top level, he will opt for engineering in data science or AI,' says Jhunjhunwala. KRISHNAV JHUNJHUNWALA,15 yrs,Kolkata Parents: Ashish & Nidhi, 48 & 46 yrs CAREER GOALProfessional tennis player/engineering. CAREER TIMELINE 2016-17Started playing at 6-7 years. 2020 Professional training and coaching. 2024 Won AITA tournament in Sonepat. Reached AITA semifinals in Kolkata. 2025 West Bengal U-16 ranked No. 5, U-18 ranked No. 7. EXPENSE TIMELINE Initial expenseRs.50,000-60,000 a year Current expense Rs.3-4 lakh a year (coaching, equipment, travel, nutrition, travel, tournament fees, fitness) FINANCIAL PLANNING Goal estimate in 2015Rs.15-20 lakh Current corpus Rs.20-25 lakh Invested in: Kisan Vikas Patra, with varying maturities for liquidity; stocks and mutual funds. NAVEEN GOGIAFOUNDER & MANAGING DIRECTOR, CREED CAPITAL Note:'Pursuing a sports career in India involves high risk, with no guaranteed returns. The financial burden is also steep and front-loaded.' Education vs sports:Why financial strategy differs It's also the reason Menon is spending Rs.30-35 lakh a year, combining Aymaan's football training with his graduation in sports science from one of the top European universities in Spain, Universidad Europea. Warrier too has kept `6 crore corpus for Jaitirth for the next 3-5 years, either for education or golf. He also insists on a four-year degree course, and possibly post-graduation as well. 'If he doesn't reach the required heights, he can get into sports psychology or sports management. The four years will also give him the time to prove himself in golf,' he says.'From 18-21, the child either turns pro or pursues college sports abroad, and international education may require Rs.25-50 lakh. By 22-30, the focus shifts to career transition. Successful athletes need long-term planning and passive income strategies; others may use a pre-built Plan B fund to pivot to alternate careers,' says Gogia. Financial planning Financial planning for a sports career is different from that for education goals for various reasons (see Education vs sports). For one, large sums of money can be required at an early age and staggered across a longer period. The higher risk, uncertainty and shorter career spans also call for a unique multi-pronged approach.'Higher education can be a preplanned activity, with the knowledge of approximate cost structure and when the funds will be required. Sports is a skill-based career and one is not aware of the level of competence the child will achieve. These are unknowns for which you have to plan a higher budget, and the plan needs to evolve with skill development,' says Dinesh Rohira, Founder & CEO, requires phased, proactive planning that balances long-term growth, short-term liquidity, and flexibility,' says Gogia. So you need to plan for short-, medium- and longterm expenses in varying instruments. 'It also needs to be slightly open-ended and a secondary budget should also be planned for triggers and sudden changes,' says Rohira. OMKAR VINOD18 yrs Bengaluru Parent: Sandhya Viswan, 49 yrs CAREER GOALProfessional squash player or aligned field in sports. CAREER TIMELINE 2016Started at 9 years, played tournaments. 2018 Ranked No. 1 in Kerala. 2023 Started professional training and being ranked in U-19 category. 2025 Has been Kerala No. 1 since 2018 & all-India No. 18 in U-19. EXPENSE TIMELINE Initial expenseRs.50,000 a year Current expense Rs.4-5 lakh a year (coaching, equipment, travel, nutrition, tournament fees, fitness) FINANCIAL PLANNING Goal estimate in 2012Rs.25 lakh Current corpus Rs.50 lakh (includes other brother's Rs.25 lakh who doesn't need it) Invested in: Traditional insurance plans. 'In the first phase (5-10 years), moderate but consistent investment in basic coaching and equipment is needed; second phase (11-16 years) calls for high, rapidly increasing costs for advanced coaching, tournaments, nutrition and physio; the third phase of elite training (17-21 years) sees peak expenditure for national/international tournaments, professional academies and sports psychologists; and finally, after 21 years, there is potential income generation or investment for an alternative education/career path,' says a first step, start SIPs in equity funds (large, flexi, or multi cap) at the earliest in order to build a large corpus for the long term, which can be used for higher expenses or Plan B needs. You can also invest in the PPF for tax-free payouts and safety.'For this core corpus, I invested nearly 50% in real estate, and the remaining in multiple assets, including stocks, mutual funds, insurance and gold,' says Warrier. 'It's extremely important to hire a financial planner and have a written plan for this goal. I invested in multiple assets, but am currently relying primarily on mutual funds,' says Menon. For medium-term requirements (3-7 year horizon), start SIPs in balanced advantage funds or fixed deposits of varying maturities that can be broken without incurring penalties as and when the need arises. 'I invested in a large number of Post Office Kisan Vikas Patra with small sums and varying maturities for both my children's sports expenses in the second phase,' says Jhunjhunwala. Next, keep an operational buffer for short-term (1-3 year horizon) expenses like equipment and gear purchase or domestic tournaments, investing in liquid, arbitrage or ultra short-duration funds, or even sweep-in fixed deposits. SUPRIYA DEVGUNFOUNDER & MD, BADMINTON GURUKUL Note:'While CSR funds, scholarships and sponsorships are offered to the top talent, it's actually needed by the upcoming talent.' Given the high risk of injury, it is also crucial to have Rs.50 lakh-1 crore medical and personal accident insurance.'If earnings begin, consider setting up a trust or HUF for tax-efficient structuring. In the career phase (after 21 years), preserve wealth with a diversified mix of equity, debt, and REITs, and create passive income through annuities or systematic withdrawals. Throughout, avoid over-locking your capital; in sports, flexibility is just as important as performance,' says Gogia.'It's also important to review the plan on a regular basis, in six months or one year, depending on the career progress of the child,' advises Rohira. Long-term investment For core corpusStart saving for the child's goal, be it sport or education, at birth. This will help build a large corpus for expensive, professional training if he chooses a sport. Or, if the sports career doesn't work out, it can be used for education in aligned fields later. Where to invest Large-cap, multi-cap or flexi-cap equity mutual funds; PPF. Medium-term investment For professional trainingIn the second phase of his training between 11 and 16 years, expenses will suddenly spiral as he moves from casual to professional training and large sums will be needed for coaching, equipment and tours for tournaments. Where to invest Balanced advantage and equity savings funds, or medium-term fixed deposits for staggered withdrawals. Short-term investment For operational expenses You will need some funds throughout his sporting journey for equipment and gear, fitness, travel and coaching fees. Where to invest Liquid or ultra short-duration funds, or sweep-in fixed deposits. No trending terms available.
