Mazagon Dock Q1 earnings: Margins drive 22% profit growth despite modest revenue rise

State-run defence shipbuilder Mazagon Dock Shipbuilders Ltd. reported a healthy rise in first-quarter earnings, with profit climbing more than 21% year-on-year as a sharp improvement in operating margins offset relatively modest revenue growth.

Profit attributable to owners of the company rose 21.5% to ₹549.4 crore for the quarter ended June 30, compared with ₹452.2 crore a year ago. Revenue from operations increased 12.1% to ₹2,943 crore, while operational EBITDA surged 48% to ₹446.6 crore. Operational EBITDA margin expanded to 15.2% from 11.5% in the corresponding quarter last year, reflecting improved execution and profitability.

Margins improve despite moderate revenue growth

While the topline registered a steady increase, the quarter was marked by a sharp expansion in profitability. Profit before tax rose to ₹686.5 crore from ₹566.9 crore a year earlier, supported by a substantial improvement in operating performance. Operational EBITDA increased at nearly four times the pace of revenue growth, underscoring stronger cost efficiencies during the quarter.

The company's finance costs rose to ₹44.3 crore from ₹35.4 crore a year ago, while depreciation and amortisation expenses were largely stable at ₹29 crore. Tax expense also increased during the quarter, tempering the flow-through of operating gains to the bottom line.

Mazagon Dock reported consolidated profit of ₹550.5 crore for the quarter, including contributions from its associate and subsidiary companies. Profit attributable to shareholders stood at ₹549.4 crore.

Defence shipbuilder maintains healthy profitability

The company, one of India's leading defence shipbuilders, continues to benefit from a strong order pipeline backed by the government's focus on indigenous defence manufacturing under the 'Make in India' initiative. Mazagon Dock is engaged in the construction of warships and submarines for the Indian Navy and Coast Guard and is exempt from segment reporting as it operates primarily in defence equipment manufacturing.

The consolidated financial results include the performance of Colombo Dockyard PLC, in which Mazagon Dock holds a 51% stake, as well as its share of profits from associate Goa Shipyard Ltd., accounted for under the equity method. During the quarter, the company's share of profit from its associate stood at ₹38.4 crore.

The board approved the unaudited standalone and consolidated financial results for the quarter at its meeting held on July 30. The financial statements were reviewed by the statutory auditors, who issued an unmodified limited review report on the results.

Shares of Mazagon Dock Shipbuilders ended 0.79% higher at ₹2,326 apiece on the NSE on Thursday. The stock has declined more than 15% over the past year, underperforming the Nifty Next 50 index, which has gained nearly 8% during the same period.