Top 3 Shipbuilding Stocks in India Ranked by Order Book Value

The Indian stock market is making headlines for experiencing bullish trends. Amid this optimistic wave, the ship and ship-building sector have gained immense focus.

Factors contributing to this trend include the government's push for self-reliance (Aatmanirbhar Bharat), increased order books, increased defence spending, and a revival in global trade, which has positively impacted the industry.

Shares of India's three major shipbuilders, Mazagon Dock Shipbuilders Ltd., Cochin Shipyard Ltd., and Garden Reach Shipbuilders Ltd, are trading at their record highs. Together, these companies have added nearly Rs 1,540 bn to their market capitalisation in the past three years.

Currently, Mazagon Dock is sitting on an order book of over Rs 368.3 bn, while Garden Reach has an order book of over Rs 252.3 bn. Cochin Shipyard boats an order book of Rs 220 bn as of 30 June 2024.

At current prices, almost all companies except VMS and Laxmipati Engineering are trading at a price-to-earnings (P/E) multiple higher than their three-year averages. This indicates that investors are willing to pay a premium for future growth prospects.

This article takes a detailed look at the top 3 shipbuilding stocks by their order value

#1 Mazagon Dock Shipbuilders

Mazagon Dock Shipbuilders Limited (MDL), established in 1774, is a prominent shipyard in India. Initially a small dry dock, MDL has evolved into a renowned shipbuilding company. It has constructed 801 vessels since 1960, including warships, submarines, cargo/passenger ships, and offshore platforms.

The company is engaged in the construction, repair, and refurbishment of warships and submarines at its dedicated facilities in Mumbai and Nhava.

Mazagon Dock recently notified about an award of a contract from Oil and Natural Gas Corporation (ONGC) for wellhead platforms and associated pipeline project (DSF-II) on an EPC reimbursable basis at the ceiling price of Rs 46.7 bn. The order is to be executed by May 2026.

The company's total order book as of 30 June 2024, stood at Rs 368.3 bn.

The company is looking forward to diversifying its activities and increase presence in the field of underwater equipment and platforms, marine equipment and platforms, heavy engineering equipment, and offshore platforms. It has also penetrated a new segment which is manufacturing cargo containers and has successfully bagged orders of 2,500 containers from Container Corporation of India Limited.

Shares of Mazagon made their stock market debut in 2020 at Rs 145. Since then, the stock has turned out to be a true multi-bagger with the government continuing to be the largest shareholder with over 84% stake in the company. The company has a market capitalisation of Rs 869.4 bn.

For the June 2024 quarter, Mazagon Dock's revenue increased by 8.5% from the same quarter last year to Rs 23.5 bn. Its Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) nearly quadrupled from last year to Rs 6.4 bn from Rs 1.7 bn.

EBITDA margin for the quarter expanded to 27.3% from 7.9% during the same quarter last year because of the reduced operating expenses.

Mazagon's better operational performance was aided by a sharp drop in the cost of materials consumed, which fell to Rs 11 bn from Rs 14.3 bn in the same quarter last year.

Its cost of procurement of base and depot spares more than halved from last year to Rs 1 bn from Rs 2.1 bn last year.

To know more, check out Mazagon Dock's financial factsheet.

#2 Cochin Shipyard

Incorporated in 1972, Cochin Shipyard (CSL) is a leading player in the construction of all kinds of vessels, repairs, and refits of all types of vessels including periodic upgradation and life extension of ships.

CSL has built & repaired some of the largest ships for its esteemed customers across the globe. It has exported some 45 ships to various clients outside India.

It has developed its expertise from building bulk carriers to smaller ships and ships that are more advanced in terms of technology such as platform supply vessels, and anchor-handling tug supply vessels.

Cochin Shipyard is into shipbuilding (defence, commercial & offshore), ship repair, marine engineering training, and strategic and advanced solutions.

The company is working on zero-emission green vessels including an H2 fuel cell vessel which is expected to be completed by February 2024 and an electric catamaran ferry with a target completion timeline by November 2024.

The current order book position is approximately Rs 220 bn of unexecuted orders, including the ship repair orders, which typically amounts to a little bit higher level than earlier times at about Rs 12 bn at this given point in time. The company has around Rs 100 bn worth of projects in the pipeline.

The company has a market capitalisation of Rs 541.1 bn.

Cochin Shipyard recently announced it has commenced commercial operations at its International Ship Repair Facility (ISRF) by successfully docking the vessel 'HSC Parali' of the Union Territory of Lakshadweep Administration. The ISRF project costing Rs 9.7 bn is set up in 42 acres of leased premises of the Cochin Port Authority at Willingdon Island, Kochi.

Cochin Shipyard also aims to tap into the European coastal shipping industry in the coming years.

Coming to its financials, for the latest quarter ended June 2024, the company reported a 76.6% year-on-year (YoY) growth in its consolidated net profit to Rs 1.7 bn. It had clocked Rs 0.9 bn profit in the year-ago period.

The company's revenue from operations increased 62% to Rs 7.7 bn against Rs 4.7 bn in the corresponding period of the preceding fiscal.

The net profit margin for the reported quarter stood at 25%, up from 21% in the first quarter of FY24 and 20% in the fourth quarter of FY24.

To know more, check out Cochin Shipyard's financial factsheet.

#3 Garden Reach Shipbuilders & Engineers Ltd.

Garden Reach Shipbuilders & Engineers Ltd (GRSE) is a premier shipbuilding company in India, operating under the administrative control of the Ministry of Defence. It primarily caters to the shipbuilding requirements of the Indian Navy and the Indian Coast Guard. The company has a market capitalisation of over Rs 204.9 bn.

The company has a partnership with Medha Servo Drives Pvt Ltd to boost India's self-reliance in shipbuilding by producing advanced electrical and electronic equipment for naval and commercial vessels.

Combining GRSE's shipbuilding expertise with Medha Servo's electrical and electronic knowledge, the collaboration aims to manufacture control and monitoring systems, electric propulsion systems, and other critical components.

This partnership strengthens GRSE's position as a leading defence shipyard with a diverse portfolio including warships, portable steel bridges, ship repair, and specialized vessels for domestic and international markets, as evidenced by their recent contracts for an ocean research vessel (ORV), a tug and dredger and multipurpose vessels.

The company has signed a contract with the National Centre for Polar and Ocean Research (NCPOR) for the construction and delivery of ORV. The total value of the order is approximately Rs 8.4 bn.

Coming to the stock performance, Garden Reach shares have doubled in the past six months. Over the past year, GRSE shares have risen more than 200%, delivering multi-bagger returns to investors.

GRSE also has a US $54 m contract with a German shipping company. The contract involves the construction and delivery of four multi-purpose vessels, each with a deadweight tonnage (DWT) of 7,500.

This order is set to be executed within 33 months and includes an option for the German firm to order an additional four ships in the future. This development is significant for GRSE, marking a major international order that showcases the company's growing global footprint.

As GRSE continues to secure large international orders and benefit from favorable government policies, it remains a promising player in the defence sector.

The company's order book as of 30 June 2024, stands at Rs 252.31 bn.

For the quarter ended June 2024, Garden Reach posted a YoY growth of 13% in net profit to Rs 870 m.

The total income for the first quarter of FY25 stood at Rs 10.84 bn against Rs 8.27 bn for the same period in FY24, registering a growth of 31%.

To know more, check out Garden Reach's financial factsheet.

Conclusion

The Indian shipbuilding industry is experiencing a positive growth phase, as reflected in the rising market capitalisations of the top listed companies.

Investor sentiment is optimistic, with P/E ratios exceeding historical averages, indicating a willingness to pay a premium for future growth prospects.

Sales growth across most companies indicates an expanding industry, but profit growth is uneven across companies.

Mazagon Dock, Cochin Shipyard, and Garden Reach Shipbuilders are the top contenders for the watchlist, given their significant order books, robust sales, and profit growth.

Overall, the Indian shipbuilding sector presents lucrative investment opportunities backed by strong government support and increasing defense exports.

However, there are plenty of checks that need to be undertaken before considering the above stocks involved in shipbuilding ecosystem to be investment worthy.

Happy Investing!

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