Defence stock to buy: Revenue visibility to support GRSE valuations, says Antique

Antique Stock Broking on Thursday said strong revenue visibility may continue to support valuations for Garden Reach Shipbuilders and Engineers Ltd (GRSE) as it reiterated a ‘Buy’ rating on the defence stock, with an unchanged target price of Rs 3,026, based on a core price-to-earnings multiple of 40 times FY28E earnings.

The domestic brokerage said GRSE is expected to conclude contractual negotiations for the Next Generation Corvettes (NGC) order, valued at around Rs 33,000 crore, by March 2026. It added that the company is strongly positioned for the P-17B Frigate programme, a Rs 30,000-40,000 crore opportunity, with the request for proposal expected by April 2026. In addition, GRSE has tied up with Hindustan Shipyard Ltd for the upcoming Landing Platform Dock order, estimated at Rs 17,000-18,000 crore.

"We project GRSE’s order book to reach Rs 81,600 crore by FY27E, 4.3 times its current order book, the resulting revenue visibility should support valuations going forward," Antique Stock Broking said.

Antique said the order pipeline remains robust, supported by defence and non-defence opportunities. It said GRSE currently has the capacity to construct 28-32 vessels concurrently, and its management is evaluating the development of greenfield shipyards in Gujarat to augment capacity, given strong demand visibility.

On the P-17B Frigate programme, the brokerage said the Indian Navy is in the process of issuing a request for proposal for seven frigates, with the project estimated at around Rs 70,000 crore. Procurement under the programme will follow a competitive bidding process, with the L1 and L2 bidders expected to execute four and three frigates, respectively. Antique said GRSE is aiming for the L1 position, supported by its execution track record under the ongoing P-17A Frigate programme.

GRSE’s current order book stood at Rs 18,500 crore, with key projects scheduled for execution over the next 1-2 years, including P-17A stealth frigates, anti-submarine warfare shallow water crafts, survey vessels and next-generation offshore patrol vessels. The brokerage noted that GRSE is L1 for the NGC order, which has entered the contractual negotiation stage and is expected to be finalised by the end of FY26.

Including the potential P-17B Frigate order, Antique said the order book could reach Rs 81,600 crore by FY27E.

Antique added that GRSE is upgrading infrastructure to raise concurrent shipbuilding capacity to 32 vessels by FY26, from 28 currently. These upgrades are expected to improve delivery timelines, enable bidding for larger orders and enhance productivity. The brokerage said management is also exploring leasing additional shipyards and dock facilities to address space and draft constraints at its existing Kolkata yard.