Garden Reach Shipbuilders hits record high; stock zooms 146% in 3 months

In the past two days, the stock has surged 17% after the company secured an international order worth $54 million for the construction and delivery of four multi-purpose vessels of 7,500 DWT each.

Shares of Garden Reach Shipbuilders & Engineers (GRSE) hit an all-time high of Rs 1,919, rising 10 per cent on the BSE in Tuesday’s intra-day trade amid heavy volumes. The stock surpassed its previous high of Rs 1,904.65 touched on June 19, 2024.

In the past two days, the stock of the state-owned shipbuilding company has surged 17 per cent after the company said it secured an international order worth $54 million for the construction and delivery of four multi-purpose vessels of 7,500 DWT each, with an option of building another four (04) ships in near future.

GRSE in an exchange filing on June 22 said that the company has signed an agreement with M/s Carsten Rehder Schiffsmakler and Reederei GmbH & Co., KG Germany on Saturday, June 22, 2024, for the construction and delivery of four (04) multi-purpose vessels of 7,500 DWT each, with an option of building another four (04) ships in near future.

 

At 12:26 pm; GRSE was trading 8 per cent higher at Rs 1,886, as compared to 0.60 per cent rise in BSE Sensex. The average trading volumes at the counter jumped 1.25 times, with a combined 8.7 million shares changing hands on the NSE and BSE.

With the past two days' rally, the market price of GRSE has surged 67 per cent from its June 5 low of Rs 1,148.10. In the past three months, it has more-than-doubled or zoomed 146 per cent.

GRSE has built over 790 platforms including 109 warships for the Indian Navy, Indian Coast Guard, and friendly foreign countries - highest warships built & delivered by any Indian shipyard till date.

Further, on June 7, GRSE had informed that the company became lowest bidder (Ll) for construction of a Research Vessel for Defence Research and Development Organisation (DRDO). The order value is likely to be Rs 500 crore approx. The contract is currently under negotiation and has not yet been signed, the company said.

As on March 31, 2024, GRSE’s orderbook stood at Rs 22,650 crore, a decline of 10 per cent year-on-year, of which Rs 22,600 crore is the shipbuilding backlog. Order backlog for P-17A frigate stood at Rs 12,170 crore, survey vessels at Rs 940 crore, ASWSWC at Rs 4,890 crore, and NG-OPV at Rs 3,360 crore.

As on March 2024, GRSE shipbuilding capacity stood at 20 ships – eight large and 12 small & medium ships. The company is expanding capacity to 24 ships by end-CY24. For ship repairs, it has acquired three dry docks on lease from the Kolkata Port Trust and it further plans to add one more. Additionally, it plans to utilize spare capacity of partner yards to ramp up execution.

Analysts at Elara Capital raised its EPS by 25 per cent for FY25E and 40 per cent for FY26E on execution ramp-up and higher Other income. “We assume core shipbuilding value of Rs 577 at 25x (from 16x) March 2026E P/E, and a cash value of Rs 337 at 8x (unchanged) P/E as we roll forward to March 2026E earnings,” the brokerage firm said in Q4 result update.

Analysts reiterated Sell rating on the stock with target price of Rs 1,180, due to deferment of a large order in Next Generation Corvette (NGC) to CY24 from FY24, which may defer revenue growth beyond FY26, and given stock outperformance vs the Nifty in the past three months.