Mazagon Dock shares faced a sharp decline of nearly 9% during intraday trading on Tuesday, continuing a notable downward trajectory that has persisted in recent sessions. By 1:15 p.m., the stock had plummeted to Rs 4,325 on the Bombay Stock Exchange (BSE), marking a decline of over 12% since August 16. This sell-off follows concerns about the stock's high valuation, which became evident after it reached a peak of Rs 4,976.40.
The stock's current market capitalisation is Rs 87,150 crore. Despite its previous status as a high-performing multibagger stock, it is now trading below its 5-day to 50-day moving averages but remains above its 100-day, 150-day, and 200-day moving averages. This shift has contributed to a bearish outlook from various analysts and brokerages.
Nirmal Bang Institutional Equities has issued a 'Sell' recommendation for Mazagon Dock, pointing to its excessive valuation as a key concern. The stock is currently trading at 30.4 times the estimated FY26 earnings per share, a significant premium compared to its three-year average price-to-earnings (PE) ratio of 11.1 times. Consequently, the brokerage has set a target price of Rs 4,468 for the stock.
Technical analyst Riyank Arora of Mehta Equities advocates for a 'sell on rise' strategy, suggesting that traders should exit their positions near the resistance levels of Rs 5,100-5,200 and consider re-entering around Rs 4,500, where robust support is anticipated. He identified immediate support at Rs 4,540 and resistance at Rs 5,155, recommending close monitoring of price action and trading volume to confirm these critical levels.
ICICI Securities also views Mazagon Dock as overvalued at its current levels, citing potential risks related to order execution timelines. Although the brokerage has revised its price target upward to Rs 1,165 from an earlier Rs 900, following improved earnings estimates, it maintains a cautious stance with a 'Sell' rating. ICICI Securities projects that EBITDA margins will taper to 12-15%, though this remains above historical levels from FY17-FY23 due to cost efficiencies. They also consider the potential impact of future orders for additional submarines and next-generation destroyers but still believe the stock is overvalued.
In summary, despite Mazagon Dock's previous success as a multibagger stock, recent performance and valuation concerns have led to a significant drop in its share price. Analysts and brokerages are advising caution, with several recommending selling the stock and reevaluating positions based on evolving market conditions and valuation metrics.
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