Garden Reach Shipbuilders & Engineers Ltd, whose shares have gained 109 per cent so far in 2024

With growing orders anticipated from European customers, Garden Reach Shipbuilders & Engineers Ltd., whose shares are up 109% in 2024 so far, has great growth potential in its Commercial Shipbuilding business. According to PR Hari, Chairman and Managing Director, the Ship Repair sector is increasing its emphasis on developing possibilities, with revenue contribution expected to rise from 1% to 3% between FY22 and FY24. Hari made this announcement during the NBIE Virtual Investor Conference.

According to Nirmal Bang Institutional Equities, GRSE expects development in the production of commercial and military ships as well as green energy platforms domestically. By creating autonomous platforms and coproducing marine diesel engines, it is enhancing its capabilities and setting itself up for future expansion.

The Indian Coast Guard and Indian Navy’s shipbuilding needs are GRSE’s main focus. GRSE’s activities are dominated by shipbuilding, accounting for 93% of the Rs 25,231 crore order book. The remaining portion of the order book is made up of the Ship Repair, Engineering (bridges & deck machinery), and Engines (MTU diesel engines) segments.

P17 Alpha accounted for Rs 14,400 crore, or 57% of the Garden Reach order book. (3 platforms). Eight platforms comprise the Anti-Submarine Shallow Watercraft, which make up 18.25% of the order book, or Rs 4,600 crore. Four platforms from Next Generation OPV account for Rs 3,100 crore, or 13% of the order book. Three platforms in the Survey Vessel Large account for Rs 850 crore, or 3.4% of the order book.

“GRSE is now anticipating high-value projects/RFPs from the Navy, such as 21 water jet FAC, 12 mine countermeasure boats, P17 Bravo, the landing platform dock, two multipurpose vessels, five next-generation survey vessels, and so on. Furthermore, 22 interceptor boats, six next-generation ocean-going vessels, and 18 next-generation rapid patrol vessels are anticipated to be the subject of RFPs from the Indian Coast Guard, according to Nirmal Bang.

Garden Reach is also looking at Green Ferry potential for the government of West Bengal. The project value of 21 water ket FACs is expected to be Rs 2,200 crore; 22 interceptor boats would cost Rs 1,200 crore; the six next-generation ocean-going vessels project might cost Rs 2,000 crore. The estimated costs for the two multipurpose vessel project are likely to be Rs 1,000–2,000 crore; the five next-generation survey vessels may cost Rs 3,000 crore. In addition, the project to build the next generation of Corvettes might cost Rs 36,000 crore, the P17 Bravo ships project could cost Rs 70,000 crore, and the cost of the 12 mine countermeasure boats could be Rs 32,000 crore.

Over the next three years, the management of GRSE anticipates revenue growth of 25–30% from important projects like P17 Alpha and Anti-Submarine Shallow Water Crafts, which would contribute Rs 5,000–5,500 crore annually. Depot spares account for 15% of the project value in total, which has an effect on Ship Construction income, which is realized when the warranty term expires.

“Garden Reach strives to keep their PAT margin between 7.5 and 8% constant. The Maritime Vision 2030, a program started by the Ministry of Ports, Shipping, and Waterways, gives Indian shipbuilders financial support and substantial chances until 2034. Due to contract amendments and new contracts with no downward slippage, GRSE’s order book value has improved. Orders from Bangladesh account for only 1.2% of the whole order book, therefore the effect is minimal. Nirmal Bang said, “GRSE views the current situation in Bangladesh as a temporary issue and does not anticipate any major delays in execution or payment.”

Even if GRSE shares have already quadrupled in 2024, there has recently been pressure on the stock. From its 52-week high of Rs 2,834.60 on July 5, it has dropped by 35%. ICICI Securities projected EPS to remain in the range of Rs 55–65 per share through FY32, accounting for large orders of NGC and NGD. The domestic brokerage also predicted that the present geopolitical tensions would cause some delays in the execution of orders from Bangladesh in a note dated August 10. With a target price of Rs 515 based on DCF, it maintained its ‘Sell’ rating on the GRSE shares.