Defence stocks to buy: Indian defence shipyard companies, including Mazagon Dock Shipbuilders, Garden Reach Shipbuilders, and Cochin Shipyards, are expected to see improvements in their fundamentals, fueled by strong orders, supportive policies, and government investment, according to domestic brokerage firm Antique Stock Broking.
In its latest “India Defence Sector” report, the brokerage highlighted the significant growth potential for Indian shipbuilding companies amid a potential surge in orders, which had remained stagnant since FY19, even though their combined revenue has increased from ₹89 billion in FY19 to ₹124 billion in 9MFY25.
The Defence Acquisition Council (DAC) has approved a substantial number of orders for FY22–25, worth ₹8.45 trillion. This is approximately 3.3 times higher than the amount approved between FY21. This suggests significant growth in the potential order pipeline.
Antique expects this to translate into significant order inflows in FY26–27 for domestic shipbuilding companies. It anticipates large orders, such as the ordering of six submarines under the P75I program, three additional Kalvari-class submarines, next-generation Corvettes, and P-17B frigates, along with smaller vessels. These orders could significantly boost the shipyards’ order books.
The brokerage has not factored in the potential ordering of the IAC-II (a second aircraft carrier) because there is a lack of consensus within the government or defense sector about whether to order more submarines or opt for a new aircraft carrier similar to the IAC-I (Vikrant).
It further points out that there are mega orders worth ₹2,354 billion lined up for FY26–27. These orders are approximately 3.1 times the combined order book of the three listed defense shipyards, suggesting that these upcoming orders will be far larger than the current business these companies are handling, creating a massive growth opportunity.
Looking beyond FY27, the brokerage sees a robust order pipeline, led by large orders for submarines and destroyers.
Mazagon Dock Shipbuilders: Order book expected to rise 5x by FY27
The brokerage expects Mazagon Dock’s order book to increase fivefold by the end of FY27, led by the ordering of Kalvari-class submarines on a nomination basis and the finalization of six submarines under the P75I plan.
Apart from this, the brokerage said the company is well placed to receive orders for Corvettes and Frigates. On the non-defense front, the company is focusing on shipbuilding and green energy platforms such as hybrid ferries and green tugs, which offer decent growth opportunities.
It maintained a ‘Buy’ rating on the stock with a price target of ₹3,433 apiece, based on a core earnings target P/E multiple of 45x FY27 earnings. The target price indicates an upside potential of 24% from the stock’s previous closing price.
Garden Reach Shipbuilders & Engineers: ₹1.2 trillion worth of orders lined up
The brokerage estimates Garden Reach Shipbuilders’ order pipeline at approximately ₹1.2 trillion, which is lined up for execution over the next two years and is equivalent to 5.0x its current order book.
On the non-defense front, the company is focused on shipbuilding and green energy platforms such as hybrid ferries and green tugs, which offer decent growth opportunities. The brokerage retained its positive view on the stock and reiterated a ‘Buy’ rating with a price target of ₹2,024, based on a core target P/E multiple of 43x FY27 earnings.
Cochin Shipyard: Muted order visibility in the near term
The brokerage noted that the stock’s performance is perceived to be tied to the potential ordering of the IAC-2, on which there is a lack of consensus in policy circles, leading to underperformance versus peers.
Nevertheless, the company has an opportunity to lead in the high-margin ship-repair business. Therefore, the brokerage maintained its positive view on the shipyard sector and assigned a ‘Hold’ rating to the stock with a target price of ₹1,481 apiece, based on a P/E multiple of 42x core FY27E earnings.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
