Indian defense shipyards are poised for significant growth, driven by a surge in orders, favorable policies, and government funding. Recent insights from Antique Stock Broking indicate a bright future for companies like Mazagon Dock Shipbuilders, Garden Reach Shipbuilders, and Cochin Shipyard. With the Indian defense sector on the rise, these firms are expected to benefit greatly from the increasing demand for naval vessels.
Growing Demand for Defense Shipbuilding
According to the latest report from Antique, the Indian shipbuilding industry is experiencing promising developments. Since FY19, the revenue of these companies has jumped from ₹89 billion to ₹124 billion by the first nine months of FY25. This growth is particularly notable given that order activity had previously stalled.
- Defence Acquisition Council Orders: The DAC has sanctioned a staggering ₹8.45 trillion in orders for the fiscal years FY22 to FY25—a figure that is 3.3 times the approvals from FY21. This indicates a burgeoning order pipeline that could lead to substantial inflows for domestic shipbuilders in the upcoming years.
Major Orders on the Horizon
Antique anticipates that the next two years will bring significant contract opportunities, including:
- Six submarines under the P75I program
- Three Kalvari-class submarines
- Next-generation Corvettes and P-17B frigates
- Additional smaller vessels
These contracts are expected to greatly enhance the order books of Indian shipyards, creating a robust business environment.
Future Outlook for Major Players
Mazagon Dock Shipbuilders: A Fivefold Increase in Orders
Antique forecasts that Mazagon Dock will see its order book expand five times by the close of FY27. Key contributors to this growth will be the Kalvari-class submarines and six submarines under the P75I initiative. The firm is also well-positioned to secure contracts for Corvettes and Frigates.
- Investment Potential: The brokerage has issued a ‘Buy’ rating with a target price of ₹3,433, indicating a potential upside of 24% from the stock’s last closing price.
Garden Reach Shipbuilders: A Strong Order Pipeline
Garden Reach Shipbuilders is expected to have an impressive order pipeline of around ₹1.2 trillion, which is roughly 5 times its current book. The company’s focus on both defense and green energy initiatives, such as hybrid ferries, adds to its growth potential.
- Stock Performance: Antique maintains a ‘Buy’ rating with a price target of ₹2,024, based on a P/E multiple of 43x FY27 earnings.
Cochin Shipyard: Challenges Ahead
While Cochin Shipyard has been facing challenges, particularly with the uncertain status of the IAC-2, the company can still thrive in the lucrative ship-repair market.
- Investment Outlook: The brokerage has a ‘Hold’ rating on Cochin Shipyard, setting a target price of ₹1,481, based on a P/E multiple of 42x FY27 earnings.
Conclusion: A Bright Future for Indian Defense Stocks
The Indian defense sector is entering a transformative phase, fueled by considerable government investment and a clear order trajectory. With major contracts on the table, companies like Mazagon Dock, Garden Reach, and Cochin Shipyard are set to capitalize on this momentum. For investors looking to capitalize on the booming defense industry, these stocks present significant opportunities.
