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Execution picks up; setting up for a strong FY23

Garden Reach Shipbuilders & Engineers (GRSE) had to adapt to modified working routines and also faced supply chain issues due to third wave of Covid. Notwithstanding, Q3FY22 has been extremely productive. GRSE signed a concession agreement with the KOPT in October CY21 in which dry dock has been taken under lease for the purpose of undertaking refit and repair activities for the commercial, naval or coast guard ships. At the diesel engine plant in Ranchi, a great deal of efforts have been undertaken for indigenization. GRSE has acquired a major contract for producing diesel alternators for the Indian Navy; three have been already been delivered to Mazagon shipyard. We upgrade to ADD with a target price of Rs 250/share.

Keel laying of ocean going passenger-cum-cargo vessel as an export vessel for the Government of Guyana has begun.

Launching of survey vessel (large) for the Indian Navy took place on 5th of December CY21. Dec’22 witnessed keel laying of shallow water craft. As a part of refit activities, two ships were refitted successfully. GRSE got an excellent rating for MoU target from the department of Public Undertaking with a score of 91.23% in Defense sector and second among 9 DPSUs. GRSE management highlighted that productivity and efficiency have improved significantly during the quarter almost matching pre Covid-19 times.

Current execution. GRSE has 5 projects of 17 ships and 6 patrol boats for Government of Bangladesh.

Out of the 5 projects, 3 are pertaining to the Indian Navy i.e. i) P17A Stealth Missile Frigate (3 Ships) all three are under construction at steady pace, ii) Survey Vessels (4 Ships) 3 of which are under construction, and iii) Shallow Water Craft (8 Ships) keel of two ships have already been laid and launching of the first ship will happen in July CY22. For the Coast Guard, Fast Vessel Project (1 Ship) is under construction and delivery is expected by end of CY22. For the Government of Guyana, Passenger-cum-Cargo ship (1 Ship), keel has already been laid and delivery is expected by July CY22. The current order book is of Rs246bn. Total cash in hand is at Rs34bn.

Potential future orders.

GRSE is bidding for the new generation patrol vessel opening this week [11 ships construction - 7 will be for L1 shipyard and 4 will for L2 shipyard]. Expected order value is ~Rs90bn. The company is also bidding for export vessels and smaller vessels. GRSE with its expertise in building ASW corvettes, is ready for go in with a strong bidding for the RFP which will be opened in future. GRSE is also looking forward to the hovercraft orders for the Coast Guard.

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