Buy Garden Reach Shipbuilders and Engineers Ltd For Target Rs.255 - ICICI Securities
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Execution pickup expected in FY22E
Garden Reach Shipbuilders & Engineers (GRSE) reported a muted Q1FY22. The company has laid the keel of 3rd survey vessel large (SVL) and 1st ASWSWC. GRSE also started production of second and third ship (Yard 3030 & Yard 3031) of the eight ASWSWC project on 14th Jul,‘21 Production has started of the Ocean Going Passenger cum Cargo Ferry Vessel for the Republic of Guyana.
GRSE laid the keel of Fast Patrol Vessel. Further, the company bagged an order to build 06 Patrol Boats for Government of Bangladesh for US$1.82mn. Overall, GRSE is well placed with ~20x book to bill with Rs 262bn orderbook to be completed by CY27; pick up in execution cycle will help unlock value. Having modernized its infrastructure facilities, GRSE is in a position to construct 20 warships concurrently using advanced modular integrated shipbuilding technology. We maintain BUY with a target of Rs 255/share.
* GRSE has laid the keel of 3rd survey vessel large (SVL) and 1st ASWSWC.
GRSE bagged both the contracts for construction of SVLs & ASWSWCs on competitive bidding and design for both has been accomplished by the in-house design team of GRSE. The survey vessel is the 3rd of the four ships being built by GRSE under the SVL project. The vessels are capable of full scale coastal & deep water hydrographic survey with their advanced survey equipment.
The vessels are 110m long with a deep displacement of 3300te and accommodation of 231 personnel. This ASWSWC is the 1st of the eight vessels being built by GRSE. The ASWSWCs are designed for a deep displacement of 750te, speed of 25 knots and complement of 57 and capable of full scale sub surface surveillance of coastal waters, SAU and coordinated ASW operations with aircraft.
* GRSE has started Production of the Ocean Going Passenger cum Cargo Ferry Vessel for the Republic of Guyana.
GRSE bagged the order for this vessel on competitive bidding, and the contract was signed with the Transport and Harbours Department of Govt. of Guyana, on 13 Jan 2021. Plate cutting signifies successful completion of pre-production activities and the same has been achieved amidst the Covid pandemic with its share of lockdowns & restrictions.
This fuel efficient vessel has been designed for carrying passengers & cargo in the coastal and riverine area of northwest district of Guyana. The ship is designed to carry 276 passengers & 14 crew members along with 14 cars, 02 trucks, 10 containers and 04 refrigerated containers. GRSE was the first Indian Shipyard to export a warship, an OPV to Government of Mauritius in 2015. The shipyard delivered a fast patrol vessel to Government of Seychelles in CY21 and also bagged a contract from Bangladesh for six patrol boats, again on competitive bidding.
* GRSE laid the keel of Fast Patrol Vessel.
This vessel is being constructed for Indian Coast Guard as a replacement for the recently exported FPV SCG PS Zoroaster, which was handed over to Govt. of Seychelles. GRSE also started production of second and third ship (Yard 3030 & Yard 3031) of the eight ASWSWC project on 14 Jul 2021. ‘Start Production’ is the first ‘Milestone’ in shipbuilding and signifies commencement of vessel construction after design engineering phase. The platforms will be packed with state-of-the-art weapons and sensors like hull mounted sonar, towed sonar, torpedo launchers and rocket launcher to interdict and destroy sub-surface targets in coastal waters.
* GRSE bagged an order to build 06 Patrol Boats for sustainable coastal and marine fisheries project under Department of Fisheries, Government of Bangladesh for US$1.82mn.
The order has been awarded to GRSE through an international competitive bidding where other international players from Europe and Asia were in the fray. The 13 m surveillance patrol boats for Marine Fisheries Surveillance Checkpost (MFSC), Government of Bangladesh will be used in surveillance activities, shallow water operation and patrolling fishing grounds day and night for illegal fishing gears & retrieval of survivors. The patrol crafts will be fitted with water jet drive, suitable for shallow water operation up to 0.6m.
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