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Mint
2 hours ago
- Business
- Mint
Stocks to buy for the long term: Mazagon Dock, GRSE, to BEL — 10 stocks in which AI sees up to 184% upside
Stocks to buy for the long term: The Indian stock market is set to end the first half of calendar year 2025 (H1CY25) with a decent gain of 8 per cent, despite significant headwinds such as geopolitical tensions, tariff-related uncertainties, and weak corporate earnings. With earnings recovering amid favourable growth-inflation dynamics, easing geopolitical tensions, and waning concerns over US tariffs, hopes are high that the domestic market will hit record highs in the second half of the year. Experts believe this is the right time to buy the dips. They suggest picking quality stocks with strong long-term fundamentals. Mint spoke to Tradonomy—a financial services and wealth management firm—for stock recommendations suitable at this juncture. The firm suggested 10 stocks to buy for the long term. Tradonomy handpicked these stocks using its proprietary quant scoring model, which analyses valuation, growth, trend, and business quality across 50+ indicators. Final picks were validated using key financial metrics like ROE (return on equity), profit margin, revenue growth, and cash flow, and justified using sectoral valuation benchmarks to estimate fair target prices. Mazagon is India's premier submarine builder, with 19 per cent revenue growth and consistently strong margins. Zero debt and high government visibility make it a defensive growth story. "With a 93 per cent Tradonomy score, it's a top-rated stock in our system. As India upgrades its naval strength, Mazagon's order book will remain full for years to come," said the financial firm. Motilal Oswal is a full-service financial powerhouse in broking, wealth, and asset management. With 18 per cent revenue growth, solid ROE, and decent margins, it's riding the retail investing boom and is a scalable platform for India's financialisation. "Cash flow remains healthy, and the 92 per cent Tradonomy score underscores quality and trend strength," said the financial firm. ACE is India's leading construction equipment manufacturer, primed to benefit from the infrastructure and logistics push. With government spending and private capex rising, ACE is well-positioned for multi-year expansion. With 14.6 per cent revenue growth, 25 per cent ROE, and 12 per cent net margins, it shows robust operating efficiency. "Cash flow conversion is strong, and the stock scores 94 per cent on Tradonomy, our highest conviction indicator," said the financial firm. Cummins powers India's infra backbone, supplying engines to railways, real estate, and data centres. With 15.5 per cent revenue growth, 26 per cent ROE, and steady margins, the company benefits from cyclical recovery and export demand. Its global quality and local scale make it a dependable long-term industrial play. "At a 90 per cent Tradonomy score, Cummins reflects high valuation strength and business stability," said the financial firm. Nippon AMC benefits from the structural shift toward mutual funds. With 24 per cent revenue growth and a 30 per cent ROE, it's among the most profitable AMCs in the country. It operates an asset-light model with excellent cash conversion. "The 89 per cent Tradonomy score confirms strong trend and growth momentum. It's a steady wealth compounder for the next decade," said the financial firm. CDSL is the digital custodian of India's equity markets. With 32 per cent YoY revenue growth and a stellar 49 per cent net profit margin, it runs a high-margin, low-capex model. ROE stands tall at 30 per cent with healthy cash flow backing. As equity culture deepens in India, CDSL becomes a quiet compounder. "Tradonomy scores it at 90 per cent, reflecting strong trends and business quality," said the wealth management firm. Garden Reach is a defence PSU building warships for India's coastal forces. A sharp 39 per cent year-on-year (YoY) revenue growth signals robust execution. ROE is healthy, and business fundamentals are strong. As defence indigenisation deepens, GRSE stands to benefit from government contracts and maritime expansion. "With a Tradonomy score of 89 per cent, it's catching investor attention," Tradonomy said. BEL is India's defence electronics powerhouse, delivering 17 per cent revenue growth and a healthy 27 per cent ROE. Its core strength lies in long-term government contracts, radar and missile systems, and increasing exports. Though cash flow conversion is low due to capex, margins remain solid. BEL is a strategic long-term bet on India's defence modernisation. "BEL's 88 per cent Tradonomy score confirms its high-quality franchise," Tradonomy said. Force Motors is transitioning from utility vehicles to a premium auto and defence mobility brand. It posted 15.6 per cent revenue growth and an impressive 26 per cent ROE, backed by BMW/Mercedes engine supply contracts. Its high 1.2 times cash conversion ratio shows capital efficiency. "Tradonomy score of 89 per cent, it's an under-the-radar compounder riding the auto-electrification curve," said the financial firm. Solar Industries leads in industrial explosives and is expanding into defence propellants and rocket tech. With 24.5 per cent revenue growth, high ROE, and two times cash conversion, it blends deep moats with futuristic segments. "The 87 per cent Tradonomy score and expanding global footprint make it a long-term asymmetric bet on India's defence-tech manufacturing," said Tradonomy. Read all market-related news here Experts believe this is the right time to buy the dips. Read more stories by Nishant Kumar Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
Mint
a day ago
- Business
- Mint
Debt-free stocks aren't always risk-free. Here's proof.
We've all been taught that debt-free companies are fundamentally strong. They generate steady cash flows, pay dividends, or reinvest in the business—all of which contribute to shareholder returns. And rightly so: a clean balance sheet often signals financial strength. Companies with zero debt enjoy lower interest burdens, greater flexibility, and resilience during downturns. But here's the catch—being debt-free doesn't make a stock risk-free. Read this | India Inc's cash ammo, lower debt offer cushion. But there's a problem A company may have no leverage, yet still struggle with low margins, poor execution, policy shocks, governance issues, or rising competition. In some cases, staying debt-free isn't even a choice—lenders might avoid the business altogether. That's why investors need to look beyond balance sheets and ask: is a debt-free company fundamentally sound, or are there hidden risks? This article examines three such stocks—Mazagon Dock, Indraprastha Gas, and Sirca Paints—which appear strong on paper but face serious headwinds. Mazagon Dock: Defence tailwinds aren't bulletproof Mazagon Dock Shipbuilders Ltd has been a star of India's booming defence manufacturing push, delivering a staggering 3,600% return over the past five years. Founded in 1774, it's the only Indian shipyard to have built destroyers, submarines, and corvettes for the Indian Navy. It has remained debt-free since FY16—alongside peers like Garden Reach (also debt-free) and Cochin Shipyard (which carries minimal debt of ₹23 crore). But its customer concentration poses a key risk. Nearly all of Mazagon's revenue depends on the Ministry of Defence (Indian Navy), making it highly vulnerable to budget cycles, policy changes, and procurement delays that could impact order flows. Shipbuilding is a long-gestation industry, with large vessels taking four to six years to complete. Revenues are booked on a percentage-of-completion basis, making earnings vulnerable to project delays. This risk played out in Q4FY25. Despite a strong order book, revenue grew just 2.3% YoY to ₹3,174 crore. Margins, however, collapsed by 14 percentage points to 3%, dragging net profit down 51% to ₹327 crore. A sharp rise in expenses was to blame. The company made provisions of ₹532 crore—up 460% YoY—for potential losses on two contracts: a Fast Patrol Vessel for the Coast Guard and six ships for Denmark. The spike reflects component cost escalations and margin compression from rising subcontracting costs. The margin blowout wasn't just a one-off. Management has warned that recently completed high-margin contracts aren't sustainable going forward. While the current order book of ₹32,260 crore provides revenue visibility for three years, growth momentum is softening. The company now expects revenue growth of 8–10%, less than half its recent pace. Large projects like Project 75(I) are facing delays. Mazagon hopes to win ₹90,000 crore in new orders, which would boost its total order book to ₹1.25 trillion. But it expects profit-before-tax margins to fall to 15%, down from 25-26% in the recent past. The acquisition of Colombo Dockyard adds further risk. While it could boost revenue by 25%, the Sri Lankan firm reported a ₹90 crore loss on ₹725 crore revenue in FY24 and carries ₹1,091 crore in debt. The acquisition ends Mazagon's debt-free status and puts near-term pressure on margins. Read this | Mazagon Dock investors should not get swayed by narrative and newsflow At a P/E of 52, the stock's valuation leaves little room for disappointment, especially with growth slowing and profitability under strain. Indraprastha Gas: Caught between gas cuts and EV adoption Indraprastha Gas Ltd (IGL), another debt-free name, is facing risks on multiple fronts. The most immediate concern is regulatory. City gas distributors like IGL depend on subsidized domestic gas—allocated by the government—for their core sectors: CNG (transport) and PNG (households). Industrial and commercial demand, however, is met through costlier imported gas. In November 2024, the government cut domestic gas allocations by 20%—the second such cut in a year. Domestic APM gas production is declining 9–10% annually as fields mature. JPMorgan expects the subsidized allocation to be phased out. To fill the gap, IGL must increasingly rely on New Well Gas (at $8–9/MMBtu) and spot LNG (up to $14/MMBtu). Read this | IGL seeks renewable energy assets as it looks to turn net zero The impact is already visible: IGL shares fell 20% on 18 November after the allocation cut. Care Ratings estimates margin erosion of around five percentage points in FY26. The rise of electric vehicles adds a structural headwind. Delhi, IGL's core market, is a leader in EV adoption. With 75% of IGL's CNG revenue coming from Delhi, a long-term decline in demand is likely. Financially, IGL's revenue has stagnated at around ₹14,000 crore over three years - ₹14,133 crore (FY23), ₹14,000 crore (FY24), and ₹14,928 crore (FY25). Net profit in the same period has fluctuated: ₹1,640 crore, ₹1,983 crore, and ₹1,713 crore, respectively. The stock trades at a P/E of 17, well below its 10-year median of 26, reflecting the market's muted expectations. Like its peers Mahanagar Gas and Gujarat Gas—both debt-free—IGL's clean balance sheet does not immunize it from regulatory and demand shocks. Sirca Paints: Clean balance sheet, but cracks are emerging Sirca Paints, known for its premium wood finishes under the Sirca and Unico brands, has grown steadily but faces rising competitive pressure. The company earns about 70% of revenue from retail customers and 30% from OEMs like Godrej and Jindal Stainless. Revenue rose from ₹264 crore in FY23 to ₹374 crore in FY25, but profit remained largely flat - ₹46 crore, ₹51 crore, and ₹49 crore over FY23–25. Sirca's margins declined by 89 basis points to 18.8% as new entrant Birla Opus captured 6.1% market share, mainly from larger players like Asian Paints and Berger. With a modest 0.6% share, Sirca is especially vulnerable. To defend its turf, it may need to increase discounts, putting further pressure on margins. Input costs are another concern. Crude oil derivatives account for 40% of Sirca's raw material expenses, exposing it to volatility in global oil prices. Despite these challenges, Sirca remains entirely debt-free, unlike larger rivals such as Asian Paints ( ₹864 crore), Berger Paints ( ₹146 crore), and Kansai Nerolac ( ₹118 crore). But in a consolidating market, Sirca may face pressure to scale up, possibly making it an acquisition target. Conclusion: Debt free is not risk free A debt-free balance sheet may provide comfort, but it doesn't tell the full story. Mazagon Dock's stretched valuation and falling margins highlight how execution risks and order dependency can undermine even a high-performing stock. Indraprastha Gas faces regulatory cuts and long-term demand shifts as EVs gain ground. Sirca Paints, while financially conservative, is up against intensifying competition and volatile input costs. Each of these companies shows that low or no leverage doesn't shield against growth headwinds, margin pressure, or strategic threats. For more such analyses, read Profit Pulse. Ultimately, earnings growth and business quality matter more than balance sheet optics. Investors must dig deeper to ask: is the company truly debt-free—or just waiting for its next challenge? About the author: Madhvendra has over seven years of experience in equity markets and has cleared the NISM-Series-XV: Research Analyst Certification Examination. He specialises in writing detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments. Disclosure: The writer does not hold the stocks discussed in this article. The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.
Mint
18-06-2025
- Business
- Mint
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. Also Read: Tata Motors' JLR navigates a tougher road in FY26 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. Also Read: Juniper Hotels' ambitious growth targets fail to excite investors 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. Also Read: Office space demand gets a push from domestic firms 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.
