Have Mazagon Dock, Cochin Shipyard, Garden Reach shares run up too much, too soon?

NSE

Stock Returns (YTD) Mazagon Dock Shipbuilders 145% Cochin Shipyard 318% Garden Reach 206%

Stock Market Cap On December 29, 2023 (₹ crore) Market Cap On July 5, 2024 (₹ crore) Mazagon Dock 46,003 1,15,702 Cochin Shipyard 17,809 75,702 Garden Reach 10,003 32,015

Stock FY26E (P/E) Five-Year Average P/E Mazagon Dock Shipbuilders 46.1x N/A Cochin Shipyard 62.3x 14x Garden Reach 50.9x 16.9x

Stock Government Stake (As of March 31, 2024) Mazagon Dock 84.8% Cochin Shipyard 72.86% Garden Reach 74.5%

Stock Retail Shareholders In March 2023 In March 2024 Mazagon Dock 1.58 Lakh 3.75 Lakh Cochin Shipyard 1.6 Lakh 3.83 Lakh Garden Reach 57,700 1.2 Lakh

Stock Institutional Holding In March 2023 Institutional Holding In March 2024 Mazagon Dock 3.55% 2.78% Cochin Shipyard 8.59% 7.36% Garden Reach 9.64% 8.60%

145%, 318%, 206% — these are not share price returns over a three- to four-year period, but returns seen by Mazagon Dock Shipbuilders Ltd., Cochin Shipyard Ltd. and Garden Reach Shipbuilders Ltd. stocks in the first six months of the year, along with the first few days of July.Shares of these shipbuilding PSUs have been on a tear and gained up to 30% in the last week itself. All three stocks hit record-high levels the previous week.The frenzied moves last week in these stocks have seen a significant addition to their market capitalisation as well.At the start of the year, Mazagon Dock Shipbuilders, Cochin Shipyard and Garden Reach Shipbuilders were cumulatively valued at around ₹75,000 crore. As of closing on Friday, they were valued at over ₹2.3 lakh crore, an addition of nearly ₹1.5 lakh crore in this year so far.Mazagon Dock also crossed ₹1 lakh crore in market capitalisation last week, during which its shares surged nearly 32%.With these kinds of moves, the valuations of all three companies have reached elevated levels.While Mazagon Dock cannot be compared with its five-year average price-to-earnings multiple as it listed in October 2020, the valuations of Cochin Shipyard and Garden Reach are trading well above their five-year average price-to-earnings multiple.The government still owns an 84.8% stake in Mazagon Dock Shipbuilders, which is still higher than the Minimum Public Shareholding norms.In case the government does sell that excess 9.8% stake at Friday's high, it may fetch them over ₹11,000 crore. In Cochin Shipyard and Garden Reach, the government shareholding is now at 72.86% and 74.5%, respectively.To take advantage of the moves seen in these shipbuilders, small investors have piled into all of these names between March 2023 and March 2024.While Mazagon Dock and Cochin Shipyard now have nearly 4 lakh small shareholders having a stake in the company, the number for Garden Reach, too, has more than doubled.However, all of these three stocks have seen a decline in institutional shareholding, which is a combination of both foreign and domestic institutions.While Cochin Shipyard has seen the biggest drop in these cases, the other two have also seen a decline in institutional shareholding.Four analysts have coverage on Mazagon Dock, of which three still have a "buy" rating. The stock on Friday traded well above its highest price target of ₹3,724. On the flip side, ICICI Securities in June maintained its "sell" rating on Mazagon Dock with a price target of ₹900. Since that note was released, shares have risen 70%.Cochin Shipyard too has six analysts with coverage and a highest target of ₹2,759. The stock made a high in excess of ₹2,900 on Friday.Garden Reach shares too made a high of ₹2,831 on Friday, well above its highest price target of ₹2,281.