Goldman Sachs’ research note, released Thursday, named a "sell" rating for both Mazagon Dock Shipbuilders Ltd. (MD) and Garden Reach Shipbuilders Ltd. (GR), slashing their target prices to ₹1,855 and ₹1,515 respectively—down 7% and 24% from current NSE levels.
The note highlights that the current market price for MD sits at ₹1,896.1, a 5.1% drop from the day’s close, while GR trades at ₹1,917.9, down 5.2%. The moves reflect a 34% and 42% decline from their 52‑week highs, underscoring the bearish sentiment.
Goldman’s analysts forecast a compounded annual EBITDA growth of 19.3% through FY29 for the two firms, a stark contrast to the 26% CAGR seen across other aerospace‑and‑defence players in the bank’s coverage universe. The discrepancy signals a potential erosion in profitability as the shipbuilders face a lumpy, cyclical market.
The research note points to a sharp drop in the trailing book‑to‑bill ratios—MD at 1.37x and GR at 1.81x—indicating that current revenue is largely driven by peak backlogs rather than sustainable order inflow. This, coupled with a smaller order book and higher valuation multiples, fuels the sell call.
Among 16 analysts covering MD, eight hold a "buy", three a "hold" and five a "sell", with a consensus price target implying a 32% upside potential. For GR, 11 analysts are in play, seven buying, two holding and one selling, and the consensus target suggests a 47% upside—though the bank’s view diverges sharply.
Looking ahead, the banding of defense contracts—often fixed‑price with front‑loaded advances—could tighten margins if cost overruns hit. The research team advises caution, noting that the Indian shipbuilding sector remains highly concentrated, with defence orders accounting for nearly 75% of domestic output, and that any slowdown in government procurement could further erode margins and valuation.
Investors should monitor upcoming order books, the pace of backlog replenishment, and any changes in the defense procurement cycle. The next earnings report, slated for December, will be pivotal in determining whether the bearish outlook can be reversed or if the firms will need to restructure their growth strategy.