Garden Reach Shipbuilders & Engineers Ltd, whose shares are up 109 per cent in 2024 so far, is seeing strong growth prospects in its Commercial Shipbuilding segment, especially with increasing orders expected from European clients. In the Ship Repair segment, it is ramping up its focus due to growing opportunities, with revenue contribution rising from 1 per cent to 3 per cent during FY22-FY24, its Chairman & Managing Director PR Hari said at the NBIE Virtual Investor Conference.
Nirmal Bang Institutional Equities said GRSE is anticipating growth in domestic warship building, commercial shipbuilding and green energy platforms. It is expanding its capabilities by developing autonomous platforms and coproducing marine diesel engines, positioning itself well for future growth.
GRSE primarily caters to the shipbuilding requirements of the Indian Navy and the Indian Coast Guard. Shipbuilding dominates GRSE’s operations, making up for 93 per cent of the Rs 25,231 crore order book. The Ship Repair, Engineering (bridges & deck machinery) and Engines (MTU diesel engines) segment makes up for the rest of order book.
Out of this, 57 per cent of the Garden Reach order book or Rs 14,400 crore comprised of P17 Alpha (3 platforms). Anti-Submarine Shallow Watercraft (8 platforms): account for 18.25 per cent or Rs 4,600 crore of order book. Next Generation OPV (4 platforms) account for Rs 3,100 crore or 13 per cent of order book. Survey Vessel Large (3 platforms) account for Rs 850 crore or 3.4 per cent of order book.
"GRSE is currently expecting high-value projects/ RFPs from Navy, including next generation Corvettes, two multi-purpose vessels, five next-generation survey vessels, 21 water jet FAC, 12 mine counter measure vessels, P17 Bravo, the landing platform dock and so on. In addition, RFPs from Indian Coast Guard are likely to come for 22 interceptor boats, six next-gen ocean going vessels and 18 next generation fast patrol vessels," Nirmal Bang said.
Garden Reach is also exploring opportunities for Green Ferry for the West Bengal government. The estimated costs for two multi-purpose vessels project is likely to be Rs 1,000-2,000 crore; 5 next-gen survey vessels may cost Rs 3,000 crore; the project value of 21 water ket FACs is likely to be Rs 2,200 crore; 22 interceptor boats would cost Rs 1,200 crore; the six next-gen ocean going vessels project may cost Rs 2,000 crore. Besides, 12 mine counter measure vessels may cost Rs 32,000 crore; the next generation Corvettes project may value Rs 36,000 crore while the P17 Bravo ships project may value Rs 70,000 crore.
The GRSE management is expecting revenue growth of 25-30 per cent over the next three years from key projects like P17 Alpha and Anti-Submarine Shallow Water Crafts, contributing Rs 5,000-5,500 crore annually. A total of 15 per cent of project value is allocated for depot spares, impacting revenue from Ship Construction, which is realised after warranty period ends.
"Garden Reach aims to maintain a steady PAT margin of 7.5-8 per cent. The Ministry of Ports, Shipping and Waterways launched the Maritime Vision 2030, which offers financial assistance to Indian shipbuilders, providing significant opportunities until 2034. GRSE's order book value has increased due to contract revisions and new contracts with no downward slippage. Bangladesh orders constitute only 1.2 per cent of the total order book, making the impact insignificant. GRSE expects no major delays in execution or payment due to the current situation in Bangladesh, viewing it as a temporary issue," Nirmal Bang noted.
While GRSE shares have doubled in 2024 so far, the scrip has been under pressure of late. It has fallen 35 per cent over its 52-week high of Rs 2,834.60 hit on July 5. Factoring in big-ticket orders of NGC and NGD, ICICI Securities estimated EPS to persist in the range of Rs 55–65 per share through to FY32. In a August 10 note, the domestci brokerage also expected some delays in the execution of orders from Bangladesh due to current geopolitical tensions. It maintained a 'Sell' on the GRSE stock with a DCF-based target price of Rs 515.