GRSE share price: Defence PSU climbed 5% today; target hints at 15% further upside

Shares of Garden Reach Shipbuilders & Engineers Ltd (GRSE) climbed 5 per cent in Thursday's trade as the defence PSU delivered higher-than-estimated Q3 revenue growth, led by execution of Frigates and anti-submarine warfare corvettes. 

Antique Stock Broking said GRSE's standalone Q3 Ebitda was higher than its estimate, as it grew 128 per cent YoY, supported by 314 basis points YoY margin expansion at 9.1 per cent.

Antique said GRSE currently has the capability to construct 32 vessels and  its present order book stands at approximately Rs 20,000 crore with major projects on track to be executed in the next two years. Besides, GRSE is L1 in the next-generation corvette order worth Rs 30,000 crore-plus, which is likely to be finalised by March 2026. 

"On the non-defence front, the focus is on ship building and green energy platforms such as hybrid ferries, green tugs, which offer decent opportunities for growth. We broadly retain our estimates and maintain Buy with an unchanged target price of Rs 3,026 at a core target P/E multiple of 40 times FY28 earnings (earlier 42 times 1HFY28E)," it said.

By 9.34 am, GRSE shares had hit a high of Rs 2,640 apiece on BSE, up 4.78 per cent. With this, the stock is up 6.35 per cent in January so far. Antique's target price hints at 15 per cent potential upside over this price. 

Antique Stock Broking expects GRSE's order book to reach Rs 62,400 crore by FY28E, 2.8 time its current order book. The resulting revenue visibility should support valuations going forward, it said.

"Being a riverine shipyard, the company lacks the capability to build larger vessels but makes it up with faster execution of smaller vessels. We project GRSE's earnings CAGR to be superior than peers in the near-term and hence maintain BUY rating with an unchanged TP of Rs 3,026 at a core target P/E multiple of 40x FY28 earnings, translating into 33 times FY28E earnings," it said.

GRSE is upgrading its existing infrastructure to build 32 vessels from 28 vessels in FY25. These enhancements are expected to significantly boost production capabilities, enabling it to reduce delivery time, bid for larger orders, and also improve productivity. 

Given the order pipeline, the company intends to lease out more shipyards in its proximate areas. The company's ability to build larger warships (Destroyer class) at Garden Reach Kolkata is constrained due to space and draft, Antique said. 

"To overcome this, the company is in discussions to lease a dock at Raichak, WB. This would enable the company to build larger warships. The medium-term plan is to invest around Rs 1,000-1,500 crore in a greenfield dock, this location would largely serve the commercial shipbuilding orders," Antique said.