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This Defence Stock Gives 40% Returns to Investors in a Month; Should you Buy?

By: Aparna Deb

News18.com

Last Updated: August 31, 2022, 11:15 IST

New Delhi, India

Bank of India's overnight MCLR has now increased by 5 basis points (bps) to 6.85 per cent.

Bank of India's overnight MCLR has now increased by 5 basis points (bps) to 6.85 per cent.

Mazagon Dock Shipbuilders Stock Price: Shares Mazagon Dock Shipbuilders Limited (MDL) have surged nearly 40 per cent in the last one month.

Mazagon Dock Shipbuilders Stock Price: Shares Mazagon Dock Shipbuilders Limited (MDL) have surged nearly 40 per cent in the last one month. The stock, which ended 11.6 per cent higher at Rs 394.80 on BSE on Monday, has delivered an impressive return to its investors.

MDL is one of India’s four strategic defence shipyards and the only one to manufacture destroyers and submarines in India. It is a Defence Public Sector Undertaking (DPSU) under the Ministry of Defence (MoD).

The company is engaged in the construction and repair of warships and submarines for the MoD for use by the Indian Navy/ Indian Coast Guard, and vessels for commercial clients with a maximum shipbuilding and submarine capacity of 40,000-DWT (deadweight tonnage). It is India’s only shipyard to have built destroyers and conventional submarines for the Indian Navy.

MDL operates mainly through two divisions: shipbuilding and submarine or heavy engineering. The shipbuilding division includes the building and repair of naval ships, while the submarine and heavy engineering division includes the building, repair and refits of diesel-electric submarines.

Meanwhile, in the past one month, MDL has outperformed the market as it surged 40 per cent after the company reported a healthy set of earnings and a strong order book position. In comparison, the S&P BSE Sensex was up 0.7 per cent, during the same period.

The company reported a strong set of quarterly numbers despite the higher raw material costs. The cost of raw materials consumed shot up to Rs 1,334.97 crore from Rs 600.43 crore a year ago. On a consolidated basis, revenue from operations stood at Rs 2,230.32 crore during the quarter ended June as compared to last year’s Rs 1,214.24 crore.

During the April-June quarter 2022, MDL bagged 2 orders from the Container Corporation of India (CONCOR) to manufacture 2,500 shipping containers. The company initiated design annd development of indigenous midget submarine. The company also developed 6 pax, hydrogen fuel cell powered electric vessel in collaboration with Tata Advanced Systems.

Should you Invest?

Giving it a buy call, Santosh Meena, Head of Research, Swastika Investmart, said: “The stock has witnessed a breakout of a bullish inverse head and shoulder formation with the surge in volume on the daily chart and retested its neckline support around Rs 300. Now it is starting the next leg of a rally where Rs 380 is an immediate resistance level; above this, we are expecting a move towards the Rs 450+ level. On the downside, Rs 300 is major support for any correction. MACD (Moving average convergence divergence) is supporting the current strength whereas momentum indicator RSI (relative strength index) is also positively poised.”

Ravi Singh Vice President and Head of Research-ShareIndia, said: “Mazagon Dock has outperformed the market in recent days after the company reported a healthy set of earnings and strong order book position. For FY23, the company has an order book worth Rs 43,343 crore. The stock price of the company is showing a strong bullish candle on daily and weekly charts and volume accumulation indicates a further uptrend from current levels. Investors may enter the stock for a long-term perspective target of 450 levels.”

Amol Athawale, Deputy Vice President – Technical Research, Kotak Securities Ltd., said: “In this quarter so far, the stock rallied over 55 per cent. Last Tuesday, the stock hit a fresh all-time high of 408. Technically, In the last week, the stock successfully cleared the medium-term resistance of 342 and after a breakout, it accelerated the positive momentum. on daily and weekly charts, the stock has formed a promising price volume breakout continuation formation which indicates the continuation of the uptrend in the near future. we are of the view of that, the short-term texture of the stock is still into the positive side but due to the temporary overbought situation, we could see range-bound activity in the near future.  Hence, buying on dips and selling on rallies would be the ideal strategy for short-term traders. 370 and 360 would be the key support zone. as long as the stock is trading above the same, the uptrend wave is likely to continue. Above this, it could move up to 425. Further upside may also continue which could lift the stock up to 445. On the flip side, below 360 traders may prefer to exit out from the trading long positions.”

The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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first published:August 30, 2022, 13:46 IST
last updated:August 31, 2022, 11:15 IST