MAZDOCK Q2 FY25 earnings call.
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₹2,757 Cr
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Mazagon Dock Shipbuilders delivered a solid Q2 FY25 with management confirming ahead-of-schedule execution on key defense programs. The company expects three major deliveries by December 2024 — the sixth Scorpène submarine, fourth Project 15B destroyer (two months ahead of schedule), and first Project 17A frigate. Management guided to 10-12% revenue growth for FY25, underpinned by INR 6,000-7,000 crore of ONGC offshore projects (executing over two years) and 31 Indian Coast Guard/export ship orders. The potential LD reversal of ~INR 300 crore (pending Ministry/Navy approval) remains a key near-term catalyst. Management outlined robust order pipeline including nominated Scorpène follow-on (AoN: INR 27,000 crore), competitive P-75(I) bid with tkMS, and potential next-generation destroyer orders. Normalized PBT margins for new projects are guided at 12-15%, lower than current period's elevated margins reflecting project completion efficiencies. The INR 5,000 crore CapEx plan (doubling capacity over 4-5 years) signals confidence in future order flow from defense, commercial, and export segments. Primary risk is timing uncertainty on large project awards creating potential revenue gap between current and future programs.
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Guidance to track
- Sixth Scorpène submarine (as per schedule), fourth Project 15B destroyer (two months ahead of schedule), and first Project 17A frigate targeted before year-end.
- Management guided to approximately 10-12% top-line growth over FY24, driven by continued execution across defense and offshore programs.
- Plans to invest INR 5,000 crore developing 15 acres adjacent to existing yard (shipbuilding/repair facility with 180m x 60m dry dock) and 40 acres near JNPT (for large vessel construction), doubling capacity in terms of numbers and vessel size.
- Management stated that normalized margin for the industry is 12-15% PBT; current elevated margins reflect completion efficiencies on legacy projects that will normalize for future programs.
Risks flagged
- Potential reversal of liquidated damages (approximately INR 300 crore) on Submarine 1 and Submarine 5 pending Ministry and Indian Navy approval; originally expected in Q2 but now pushed to Q3 at earliest.
- Competitive submarine program with tkMS collaboration awaits government direction; no clarity on timeline or whether both bidders could be considered under single contract.
- Commander Puranik acknowledged there might be a dip in revenues as current large programs wind down before new orders fully ramp up, though management expects ICG/export/ONGC to sustain levels.
- Current margins elevated due to completion efficiencies on legacy projects; new projects will be priced at normalized 12-15% PBT, potentially compressing margins from H1 FY25 levels.
Key quotes
- Between these two large programs, we have already taken three orders from the Indian Coast Guard and also one export order. Put this together, the complete contract, if it is they're executing, it is 31 ships. So this is basically a pillar for the time during which a large order may take some time to mature.
- The normalized margin for our industry would be something around 12%-15%.
- This CapEx will come to fruition because there is environmental clearance, there is civil works. It will take a minimum of four to five years from now for making it operational. Once it is becoming operational, we will be able to build very large-sized vessels.
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