2 Midcap Defence Sector Stocks To Hold For High Returns, Suggests ICICI Direct

ICICI Direct assigns "Hold" on two midcap defence sector stocks namely Mazagon Dock Shipbuilders Ltd. (MDL) and Garden Reach Shipbuilders and Engineers Ltd. (GRSE). If you hold the stocks, it could fetch high returns. The government has signed contracts worth ~Rs 44000 crore in March 2023 with defence PSUs like Bharat Electronics (BEL), Bharat Dynamics (BDL), Cochin Shipyard (CSL), Goa Shipyard (GSL) and Garden Reach Shipbuilders & Engineers (GRSE), according to the brokerage firm.

Mazagon Dock Shipbuilders Ltd. (MDL)

ICICI Direct maintains HOLD on MDL with a target price of Rs 745/share. It sees up to 14% gains from its current level. The stock last traded at Rs 657.10/share.

Its 52 week low is Rs 229.45/share and 52 week high is Rs 936.40/share. In 1 week, the stock has given 5.28% positive return and 10.2% negative return in 1 month. In the last 1 year, it gave 161.32% positive return.

Since the date of listing, it gave a robust 282.15% positive return. It was listed on 12 October 2020. It has a market capitalisation of Rs 13,253.05 crore.

ICICI Direct's Views on MDL

ICICI Direct said, "Execution is expected to remain strong over the next two years (primarily led by pick-up execution of contracts, P-15B destroyers & P-17A frigates) with sustainable margins, which would lead to earnings CAGR at 20.5% CAGR over FY22-25E. However, if there is any significant delay in these large scale future orders of submarines and destroyers, this may impact revenue growth beyond FY26, FY27."

It added, "We maintain HOLD on MDL with a revised target price of Rs 745 (valuing at 14x P/E on FY25E EPS)."

Garden Reach Shipbuilders and Engineers Ltd. (GRSE)

The brokerage downgrades the rating on GRSE from Buy to HOLD with a target price of Rs 520/share. If you hold the stock, it can fetch up to 17% gains considering the given target price. The stock last traded at Rs 447.10/share.

Its 52 week low is Rs 207.70/share and 52 week high is Rs 556.80/share. In 1 week, the stock has given 10.26% positive return and 2.09% in 1 month, respectively. It gave 161.32% positive return in the past 1 year, and 214.44% in the past 3 years, respectively.

Since its date of listing on the exchange, it gave a robust 333.16% positive return. It was listed on 10 October 2018. It has a market capitalisation of Rs 5,125.63 crore.

ICICI Direct's Views on GRSE

ICICI Direct said, "Execution is expected to remain strong over the next two years (primarily led by pick-up execution of contracts, P-17A frigates, Large survey vessels and ASW-SWCs) with up-tick in margins (led by operating leverage) that would lead to earnings CAGR at 37.6% CAGR over FY22-25E. However, we cut our estimates to factor in the lower than expected execution in FY23. Moreover, if there is any significant delay in execution and announcing of large scale order of next generation corvettes, this may impact revenue growth beyond FY26, FY27."

It added, "We downgrade our rating on GRSE from Buy to HOLD with a revised target price of Rs 520 (valuing at 12x P/E on FY25E EPS)."

Disclaimer - The stocks have been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.