Can Mazagon Dock's Unique Opportunity in Submarine Tourism Propel the Stock to New All Time High?

Innovation can be very exciting. Companies over the world use a new technology to solve problems and the world is better off for it.

One such interesting development that I could come across is a US company create a sovereign nation at sea.

You heard that right! An entire nation in the sea... think about that for a while.

Sometime in October last year, Del Complex announced its plans for building this nation at sea and introduced the BlueSea Frontier Compute Cluster.

This image below that you're seeing below would operate as its own sovereign nation state deep in international waters, free from the constraints of regulatory bodies.

Now, when I tried searching for any Indian listed company doing something groundbreaking like this in domestic waters, or for anything unique in that matter, I came across a very interesting article that said India is making a submarine to provide deep-sea underwater tourism.

And the Indian listed company that could benefit from this unique opportunity is none other than Mazagon Dock Shipbuilders.

Mazagon Dock's Unique Opportunity in Submarine Tourism

It was recently reported that the Gujarat government is planning to acquire a submarine worth Rs 500 million (m) to provide a deep-sea underwater experience to tourists visiting Beyt Dwarka.

Beyt Dwarka is a small island believed to be a part of the submerged ancient kingdom of Lord Krishna.

The tourism department yesterday revealed:

• "We have inked a Memorandum of Understanding with Mazagon Dock Shipbuilders Ltd for building a submarine that can carry passengers".

This is the first-of-its-kind submarine project for tourists in India and a formal announcement for the same is expected to be made during the upcoming Vibrant Gujarat summit next week.

The submarine is expected to weigh around 30 tonnes and carry between 25 and 30 passengers to a depth of 300 ft.

Sure, this is only a minor addition to Mazagon Dock's heavy order book but think about the possibility of the company getting more such orders in the future so that local governments try and open the ancient ruins and let tourists explore underwater marine life.

It's early to say, but there's an opportunity here for Mazagon Dock in terms of submarine tourism.

We have no idea if this is a one-time thing or it's actually a big opportunity for companies like Mazagon Dock.

But the idea is complex and combined with a stable government and improved tech, it will be interesting to see how they pull it off.

Strong Growth Prospects

On 15 December 2023, the company inked a US$ 42 million contract with a European client.

Mazagon Dock will construct three state-of-the-art 7,500-deadweight tonne (DWT) multi-purpose hybrid powered vessels in the next 27 months.

Note that the shipbuilding company has won a slew of orders in the past four months.

In the past, the company has seen its order book decline from a peak of Rs 550 bn in 2019.

As of September 2023, the company's order book was around Rs 375 bn. This is to be executed by the financial year 2026. The company is expecting to report peak revenue and profit by then.

It has major contracts, such as Project-17A frigates, Project-15B destroyers, and Project-75 submarines, in its order book.

In addition, it has signed a Memorandum of Understanding (MOU) with Germany's Thyssenkrupp to participate in an Indian Navy submarine tender worth approximately US$ 5.2 bn.

Apart from this, Mazagon Dock has also entered into multiple agreements with private businesses. These agreements aim to boost defence exports from US$ 1.5 bn to US$ 5 bn by the end of the financial year 2024-25.

Some of the notable recent mentions include the company entering into a ship repair agreement with the US government.

This agreement allows voyage repairs of US Navy Ships, making Mazagon Dock one of the two shipyards in India with such an agreement.

Meanwhile, in late December 2023, Mazagon Dock signed a contract with the Ministry of Defence worth Rs 16 bn.

Recently, it was reported that the government may divest stake in companies including shipbuilding PSU, which included Mazagon Dock. The government owns around 84.8% stake in Mazagon Dock Shipbuilders as of September 2023.

How Mazagon Dock Share Price has Performed Recently

In the past one month, Mazagon Dock share price has gone up by 9%.

In the past one year, Mazagon Dock shares are up almost 200%.

Shares of the company continue to trade near all-time high levels on the back of optimism surrounding its heavy order book.

It has a 52-week high of Rs 2,483 touched on 8 September 2023 and a 52-week low of Rs 613 touched on 27 March 2023.

Here's a table comparing Mazagon Dock with its peers.

Comparative Analysis

Company	Mazagon Dock	Cochin Shipyard	Knowledge Marine
ROE (%)	24.3	6.9	52.1
ROCE (%)	32.8	10.2	56.7
Latest EPS (Rs)	65.8	16.3	43.1
TTM PE (x)	34.9	49.1	35.1
TTM Price to book (x)	8.6	2.2	12.2
Dividend yield (%)	0.7	1.1	0.0
Industry PE	40.2
Industry PB	6.7

Data Source: Ace Equity

About Mazagon Dock

Mazagon Dock is engaged in manufacturing warships, submarines, cargo and passenger ships for the defence sector. It also undertakes ship repairing activities for its clients.

In the last three years, the company's revenue has grown at a CAGR of 22.6%, driven by a healthy order book. The net profit also grew by a CAGR of 32.1% during the same period.

It's a zero debt company, having paid consistent dividends.

To know more, check out Mazagon Dock Ship's financial factsheet and latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...