Mazagon Dock Shipbuilders soars 7% on signing LOI with European client

In past six months, the stock price of MDL has zoomed 220 per cent, as against 10 per cent gain in the S&P BSE Sensex.

Shares of Mazagon Dock Shipbuilders (MDL) soared 7 per cent to Rs 2,219.55 on the BSE in Tuesday’s intra-day trade after the company said it signed Letter of Intent (LOI) with an European client for construction of 6 firms and 4 optional units of 7500 DWT (Deadweight Tonnage) MultiPurpose Hybrid Power Vessels. The prices for which would be firmed up at the time of Signing of Contract, MDL said.

At 09:50 AM; MDL was quoting 5 per cent higher at Rs 2,179, as compared to 0.45 per cent rise in the S&P BSE Sensex. The average trading volumes at the counter nearly doubled. A combined nearly 1.2 million equity shares changed hands on the NSE and BSE. The stock had hit a record high of Rs 2,483 on September 8, 2023.
 

ICICI Securities estimate contract size of Rs 700-800 crore for 6 vessels. Order backlog is estimated to be at around Rs 37500 crore (4.8x TTM revenues). MDL had been exploring export opportunities in the defence or commercial shipbuilding segment and with this contract, the brokerage firm believe that more opportunities would emerge for the company in future.

As per the industry reports, Europe is showing strong traction in the commercial shipbuilding segment as 2000-2500 old vessels are expected to be replaced with electric/hybrid vessels in the next 10 years. The brokerage firm believe that this presents a huge opportunity for Indian shipyards in the coming period.

Last month, MDL had signed Master Ship Repair Agreement (MSRA) with the US Government represented by NAVSUP Fleet Logistics Center (FLC) Yokosuka. This is a Non-Financial Agreement. There are only two shipyards in the country including MDL who have signed MSRA. The agreement is expected to open-up voyage repairs of US Navy Ships at MDL, the company had said in an exchange filing.

Meanwhile, in past six months, the stock price of MDL has zoomed 220 per cent, as against 10 per cent gain in the benchmark index.

MDL being a defence PSU, primarily engaged in construction of warships and submarines for Indian Navy, once delivered, MDL have no control over its products i.e. warships and submarines. The company is principally engaged in building and repairing of ships, submarines, various types of vessels and related engineering products for its customers.

MDL is exploring the possibility for setting up a green field shipyard at its Nhava Yard in a phased manner with short term and long term developments plan. Short term development will enable MDL to facilitate the immediate use of the existing infrastructure for shipbuilding and ship repair business whereas long term development will facilitate the construction of large size vessels and submarines including major refit and repairs.

To undertake the construction of advanced and next generation vessels, MDL intends to build a New Floating Dry Dock of 12000T capacity.