Mazagon Dock Shipbuilders continues to demonstrate resilient execution across its naval programs, even as its order book gradually normalizes after several years of elevated backlog. ICICI Securities has reiterated its BUY call, citing near-term revenue stability driven by existing contracts and a robust pipeline of large-ticket defence orders expected to be awarded in the coming months. While revenue growth has moderated compared to the past four years, margin expansion, balance-sheet strength, and visibility on next-generation submarines and warships underpin confidence in earnings growth beyond FY27. At current valuations, ICICI believes the recent stock correction offers a compelling entry point for long-term investors.

Strategic Importance: India’s Only PSU Shipyard for Destroyers and Submarines

Mazagon Dock Shipbuilders occupies a strategically irreplaceable position within India’s defence manufacturing ecosystem. It remains the only public-sector shipyard capable of constructing both frontline destroyers and submarines, with concurrent capacity for 11 submarines and 10 warships, including frigates and auxiliary vessels.

This operational depth gives the company a structural advantage as India accelerates naval indigenisation under long-term defence modernization programs. The yard’s execution track record across complex platforms reinforces its relevance for future contracts.

Order Book Reality Check: Near-Term Execution, Medium-Term Dependency

As of December 2025, the company’s order backlog stands at Rs 23,758 crore, equivalent to 1.9x trailing twelve-month revenue. While this represents a steady decline from FY21 peak levels, the current backlog remains sufficient to sustain revenue momentum over the next two to three years.

Order composition highlights:

P-17A stealth frigates account for ~42% of the backlog

ONGC commercial contracts contribute ~18%

Residual execution on P-15B destroyers and P-75 submarines continues

Most of these projects are expected to conclude by FY27, meaning revenue growth beyond that period will hinge on fresh order awards, particularly in submarines and next-generation surface combatants.

Execution Snapshot: Q3FY26 Reflects Operational Stability

Mazagon Dock reported a steady, execution-led performance in Q3FY26, supported by improved progress across ongoing naval programs.

Key quarterly takeaways:

Revenue rose 14.6% YoY to Rs 3,601 crore

EBITDA increased 8.6% YoY to Rs 887 crore

PAT grew 9% YoY to Rs 880 crore

While margins moderated slightly on a year-on-year basis due to higher raw material and operating costs, sequential improvement underscored disciplined cost management and better execution efficiency.

9MFY26 Performance: Growth Sustained Despite Cost Pressures

For the first nine months of FY26, revenue growth stood at 10.9% YoY, broadly aligned with management guidance. However, EBITDA margins contracted by 329 basis points as input costs normalized from unusually favorable levels in the prior year.

Despite margin compression, profitability remained stable, reflecting the company’s pricing structure in defence contracts and its ability to absorb cost volatility without disrupting execution timelines.

Order Pipeline: The Real Growth Trigger Lies Ahead

ICICI Securities’ conviction rests not on the current backlog, but on the depth of the upcoming order pipeline, which remains among the strongest in India’s defence manufacturing space.

Major opportunities include:

Six next-generation submarines under Project P-75I (estimated Rs 70,000 crore)

Three additional Kalvari-class submarines (Rs 30,000–40,000 crore)

Next-generation frigates (P-17B) and destroyers (P-18), together exceeding Rs 1.5 trillion in potential value

In addition, the company has entered a strategic MoU with Swan Defence to jointly bid for Landing Platform Dock vessels, further expanding its competitive footprint.

Financial Trajectory: Margins Hold, Cash Position Strengthens

ICICI estimates revenue CAGR of approximately 11.5% over FY25–FY28, supported by EBITDA margins sustaining in the 18.5–19% range.

Key financial indicators:

EBITDA expected to rise from Rs 2,060 crore in FY25 to Rs 3,053 crore by FY28

PAT projected to grow to Rs 3,529 crore by FY28

Cash balance forecast to exceed Rs 25,000 crore by FY28

The company remains debt-free, providing significant financial flexibility as capex requirements rise with future order wins.

Valuation Framework: Correction Creates Opportunity

ICICI Securities values Mazagon Dock at 35x FY28E earnings, arriving at a target price of Rs 3,060 per share. Following the recent stock price correction, valuations now better reflect the transition phase between execution of legacy orders and award of new contracts.

Investment thesis at current levels:

Near-term earnings visibility supported by existing backlog

Medium- to long-term growth driven by defence indigenisation

Strong balance sheet reduces downside risk during order transition

Risks to Monitor: Policy and Working Capital Sensitivities

Despite the constructive outlook, investors should remain aware of structural risks:

Key risk factors include:

Dependence on government contract awards and approval timelines

Elevated working capital requirements inherent to large defence projects

Availability of specialized raw materials and imported components

Any prolonged delay in finalizing large submarine or surface ship contracts could impact revenue growth beyond FY27.

Investor Takeaway: A Strategic Asset in Transition

Mazagon Dock Shipbuilders is navigating a temporary normalization phase, not a structural slowdown. ICICI Securities’ BUY rating reflects confidence that execution stability, a formidable order pipeline, and strong financial discipline position the company favorably for the next leg of growth.

For investors with a medium- to long-term horizon, the current valuation offers exposure to India’s naval modernization story through one of its most strategically critical manufacturers.