GRSE shares slip 8% from day's high despite order win; should you chase this defence PSU stock?

Shares of Garden Reach Shipbuilders & Engineers (GRSE) Ltd jumped 5.47 per cent in Thursday's early trade to hit a day high of Rs 1,811.20. The stock later erased its entire gains as the session progressed and slipped 7.74 per cent from its day's high level to hit a low of Rs 1,671.

The defence PSU, yesterday, secured an additional order worth $54 million for vessels from a German company. "This has reference to our letter dated June 22, 2024, on the subject matter. In that communication, it was mentioned that GRSE signed a contract with M/s Carsten Rehder Schiffsmakler and Reederei GmbH & Co., KG Germany, on 22 Jun 2024, for construction and delivery of Multi-Purpose Vessels, with an option of building another four (04) ships in the near future. The company has received a confirmation from the customer to buy and deliver an additional four (04) Multi-Purpose Vessels, on the existing terms and Conditions. The size of the order is additional approx. $54 million for further four vessels. The total value would be approx. $108 Million for eight Vessels," GRSE stated.

A few technical analysts largely suggested that the counter looked 'bearish' in the near term. Investors "should not chase this stock" as upside "targets are not big," one of them said. Another recommended to opt for a 'buy-on-dip' strategy.

"Traders should not chase this stock. Let it cool off and investors can enter around Rs 1,760-1,770 levels with a stop loss at Rs 1,720. On the higher side, targets are not big. Rs 1,860-1,870 will be the upper side of this stock. It can still consolidate in the range of Rs 1,700 to Rs 1,900," Aditya Agarwal, Head of Derivatives & Technical at Sanctum Wealth, told Business Today TV.

"The stock continues into the corrective phase and is likely to attract further correction. On the level-specific front, Rs 1,500 will be seen as an intermediate support. On the higher end, a series of resilience can be seen from Rs 1,900 to Rs 2,000-odd zone in the near period and a decisive breakthrough could only bring some mojo back in the counter," said Osho Krishan, Senior Research Analyst - Technical & Derivatives at Angel One.

"Investors should only consider buying the stock on dips. One can enter around Rs 1,500 levels for an expected target price of Rs 1,750. Keep a stop loss placed at Rs 1,750," said Ravi Singh, Senior Vice-President (Retail Research) at Religare Broking.

"Garden Reach stock price is bearish on daily charts with strong resistance at Rs 1,813. A daily close below support of Rs 1,720 could lead to a downward target of Rs 1,353 in the near term," Sebi-registered research analyst AR Ramachandran.

The counter traded lower than the 5-day, 10-, 20-, 30-, 50-day and 100-day simple moving averages (SMAs) but higher than the 150-day and 200-day SMAs. The counter's 14-day relative strength index (RSI) came at 34.33. A level below 30 is defined as oversold while a value above 70 is considered overbought.

The company's stock has a price-to-equity (P/E) ratio of 53.49 against a price-to-book (P/B) value of 11.75. Earnings per share (EPS) stood at 32.11 with a return on equity of (RoE) 21.98.

The company is a premier warship-building company, under the administrative control of the Ministry of Defence. As of June 2024, the government held a 74.50 per cent stake in the state-owned firm.