Antique Stock Broking has reiterated its 'Buy' rating for Garden Reach Shipbuilders & Engineers Ltd (GRSE) shares, despite a 5 percent reduction in its target price. The brokerage firm adjusted its target from Rs 3,141 to Rs 2,990, citing slower-than-expected finalization of crucial defense contracts, which has impacted revenue recognition timelines.
Analyst View on GRSE Performance
The decision to maintain a 'Buy' rating comes after GRSE's first-quarter results aligned with expectations. Antique highlighted that GRSE's revenue growth was significantly driven by the ongoing execution of the P17A Frigate project and Anti-submarine Warfare (ASW) corvettes.
Q1 Results Overview
For the quarter, GRSE reported robust year-on-year growth across key financial metrics: revenue surged by 38.5 percent, EBITDA increased by 33.3 percent, and Profit After Tax (PAT) saw a healthy rise of 43.8 percent. This growth was primarily attributed to the advanced stages of delivery for the third Frigate under the 17A program and accelerated momentum in the delivery of ASW Corvettes, with four still pending. However, the EBITDA margin experienced a slight decline of 30 basis points year-on-year, settling at 8.2 percent, mainly due to higher material costs.
Key Triggers and Future Outlook
A significant near-term catalyst for GRSE's stock, according to Antique, is the anticipated finalization of the Next-Generation Corvette (NGC) order, valued at over Rs 33,000 crore. This order is expected to provide substantial revenue visibility once confirmed.
Expansion and Long-Term Vision
Beyond its core defense shipbuilding activities, GRSE is actively exploring opportunities in commercial shipbuilding, where the outlook has notably improved. The company aims to boost its annual shipbuilding capacity to 32 ships and is also in the process of identifying a suitable location for a new greenfield manufacturing unit. These strategic initiatives underscore GRSE's strong long-term growth projections.
Antique projects GRSE's order book to expand significantly, reaching an estimated Rs 75,600 crore by FY28E, which would be nearly 4.9 times its FY26 order book. This substantial pipeline, coupled with a healthy defense order outlook and growing commercial opportunities, underpins the brokerage's continued confidence in GRSE's earnings growth and its maintained 'Buy' recommendation.