5 Under-the-Radar Shipbuilding Stocks You Need to Watch

The stock market is a relentless judge of winners and losers. Despite the presence of bulls and bears for any asset, it is the market that ultimately determines the outcomes.

Recently, shipbuilding stocks have caught the attention of investors.

A year ago, if you had invested in the top three shipbuilding stocks – Cochin Shipyard, Mazagon Dock, or Garden Reach Shipbuilders – and held on, your portfolio would have seen over 100% growth.

These companies seemed unstoppable at times, receiving accolades from financial analysts and media alike.

In 2024, these three giants have collectively added nearly Rs 1.5 trillion to their market capitalisation.

While major players dominate the headlines, there are lesser-known companies making significant strides in shipbuilding.

These under-the-radar companies might not currently show substantial value, but with positive sectoral sentiment, it's worth keeping an eye on them.

Here are five such lesser-known companies involved in shipbuilding.

1. VMS Industries

VMS Industries is a specialized manufacturer focusing on advanced vessels and maritime equipment.

The company buys old ships, dismantles them, recovers usable parts, and sells the scraps.

Its ship-breaking yard at Alang-Sosiya, which accounts for nearly 90% of India's ship-breaking activities, is the largest in the country.

The share price of VMS Industries currently stands at Rs 43.7, having rallied over 190% in the past year.

The company reported record revenue and net profit in FY24, changing the previous years' trend of steady topline and bottomline growth.

VMS Industries has secured strategic government contracts and plans to expand its manufacturing capabilities and enhance research and development efforts.

Despite the current favorable conditions, it's important to remember that the ship-recycling industry is cyclical, with the supply of old ships for recycling inversely proportional to global freight rates.

2. Inducto Steel

Inducto Steel is engaged in ship breaking, trading, and investment activities.

The company manufactures high-quality steel components crucial for shipbuilding and maritime infrastructure.

Its stock price has risen by 90% over the past year.

For the year ending March 2024, Inducto Steel reported a 10% increase in revenue, though profits remained flat compared to the previous year.

Part of the Hariyana Group, which has been in the ship-breaking business for around three decades, Inducto Steel plans to invest in expanding its production capacity and enhancing its technological infrastructure.

3. Hariyana Ship Breakers

Hariyana Ship Breakers, located near major ports, specializes in environmentally responsible ship recycling and dismantling services.

It has become a preferred partner for shipowners seeking safe and sustainable disposal solutions.

The company's revenue is bolstered by a steady influx of decommissioned vessels and a growing emphasis on recycling practices.

Since listing, the company's share price has grown by over 1,294%, with a 40% increase in the past year.

Despite a threefold increase in revenue in FY24, the company's margins remained under pressure, with flat net profit growth.

Hariyana Ship Breakers has also ventured into real estate by partnering with reputed players and completing various projects in Bengaluru.

4. Laxmipati Engineering & Works

Laxmipati Engineering & Works holds an industrial license from the Indian government to build warships for the Navy and Coast Guard.

Formerly known as L.P. Naval & Engineering, the company is involved in fabrication, heavy engineering, engineering infrastructure, and shutdown maintenance projects.

Incorporated in 2012, the company has become a reliable partner in manufacturing, engineering services, repair, and upgrades.

It generates significant revenue by providing manpower and fabricating services to the engineering sector.

With a client list that includes big names like L&T, the company completed 10 projects in FY23.

Since listing in September last year, its stock price has increased by 71%.

For FY24, the company reported a net profit of Rs 7.8 million, compared to a loss of Rs 47.3 million in FY23, due to a significant rise in topline revenue.

Laxmipati Engineering & Works plans to develop capabilities in working with special grade alloys and materials, and form technical partnerships in the oil & gas and defence sectors to expand its defence-related portfolio.

5. Dredging Corp of India

Dredging Corp of India recently signed an agreement with Cochin Shipyard to construct the first trailing suction hopper dredger (TSHD) entirely built in India.

With decades of experience, Dredging Corporation was a government-owned enterprise specializing in dredging and marine infrastructure development.

The company maintains navigational channels and facilitates port operations across India’s coastline.

After the government divested its stake, the company is now jointly owned by several port authorities.

Financially, the company remains strong, supported by long-term contracts with port authorities and government agencies.

Over the past year, Dredging Corp's share price has increased by 287%.

Recently, the company secured an annual maintenance dredging contract from the Cochin Port Authority, valued at around Rs 1.6 billion.

Last month, it won a Rs 20.2 billion order from the Syama Prasad Mookerjee Port Authority for five years of maintenance dredging in the Hooghly Estuary.

With an 80% market share in the domestic dredging market, the company's order book is supported by the renewal of dredging contracts, essential for maintaining sea routes for international trade.

In Conclusion, The shipbuilding industry significantly contributes to overall industrial growth, impacting sectors such as steel, engineering equipment, port infrastructure, trade, and shipping.

With extensive direct and indirect linkages, the shipbuilding industry plays a crucial role in the mission of an 'Aatmanirbhar Bharat'.

However, potential investors should conduct thorough research and exercise caution before investing in shipbuilding stocks due to unforeseen environmental costs that may impact future earnings and affordability of products and services.

We hope you found this exploration of lesser-known shipbuilding companies insightful and informative.