GRSE rises over 18%

Garden Reach Shipbuilders & Engineers (GRSE), a Defence PSU, is the top gainer on the BSE, leading the pack of other defence stocks, given the Indo-Pak situation in the country. From its close of Rs.1915, the stock opened 14% higher at Rs.2184, going up further by over 18% 2264.65.

GRSE is up, apart from the fancy for defence stocks, on the back of its excellent earnings for Q4FY25, wherein, it reported the highest ever revenue and profit for FY25. Q4FY25 revenue rose 62% YoY to Rs. 1,642 crore, with PAT up 119% YoY to Rs. 244 crore, translating into 15% net margin and an EPS of Rs. 21.

For FY25, revenue surged 40% YoY to Rs. 5,076 crore, much higher than the provisional FY25 revenue of Rs.4,750 crore announced earlier. FY25 PAT jumped 48% YoY to Rs. 527 crore, leading to a double-digit net margin of 10.4%, due to high indigenisation content of over 80%. FY25 EPS grew to Rs. 46, from Rs. 31 YoY.

Company's order book of about Rs. 25,000 crore represents a book to bill of approximately 5x. 57% of this order book comprises P17 Alpha (Nilgiri class frigates) and 18% anti-submarine shallow watercraft. It guides executing this order book by FY29E, implying a potential growth rate of 30% in PAT for the next 2 years, till FY27E.

Garden Reach builds ships, with capacity to build 20 warships concurrently (8 large, 12 small / medium size) and ships of 5 Ton Boats to 24,600 Ton fleet tankers. It has entered into a non renewable 30 year lease agreement with Syama Prasad Mookerjee Port, Kolkata for a land parcel at Timber Pond, Howrah, to increase shipbuilding and ship repair facilities. It has also signed an MoU with Swan Defence, for indigenous construction of commercial vessels and offshore structures for global customers, thereby supporting Aatmanirbhar Bharat in maritime sector.

Strong order book, production maturity of ongoing projects and order visibility (estimated new wins of over Rs. 1 lakh cr over the next 18 months, including in the commercial shipbuilding segment) makes company confident of an even better performance in FY26E.

Mr.SP Tulsian is very bullish on the stock saying that on FY26E EPS of about Rs. 62, share is ruling at a PE of only 25.6x, net off cash of Rs. 326 per share, which is quite attractive for 28% RoE, double digit net margin, high growth visibility and sector tailwind. He is of the opinion that due to global shipyards being completely booked till 2028, and the rising demand with Government’s policy incentive making the sector outlook promising.