Buy Garden Reach Shipbuilders and Engineers Ltd For Target Rs.3,500 by Choice Institutional Equities Ltd
Robust Order Book Strengthens Growth Visibility
GRSE reported a steady operating performance in Q2FY27, with revenue growing 8.9% YoY. Sequential improvement in operating margin and progress across key programmes remain encouraging, reflecting the company's continued execution momentum.
We expect H2FY27 revenue momentum to improve, supported by the execution and delivery of the remaining ASW-SWC vessels, progress on the P-17 Alpha programme and continued construction across the NGOPV, research vessel and German MPV projects. Progression of these programmes towards equipment integration and outfitting stages is expected to support a stronger execution run-rate in H2FY27.
GRSE's order book provides strong medium-term revenue visibility. As of June 2026, the order book stood at INR 13,596 Cr. (1.9x of FY26 revenue). Further strengthening its execution pipeline, the company signed a INR 32,000 Cr. contract for five Next-Generation Corvettes in November 2026. Including this contract, the pro-forma order book increases to ~INR 45,600 Cr. (6.5x of FY26 revenue), providing significant visibility for the coming years. Looking ahead, the execution of P-17 Alpha frigates, NextGeneration Corvettes, NGOPV and commercial shipbuilding programmes is expected to provide sustained revenue growth over FY28–FY29.
Strong EBITDA Growth, but PAT Misses Estimate
* Revenue was up by 8.9% YoY and 0.7% QoQ at INR 18,267 Mn (vs CIE est. of INR 21,806 Mn)
* EBITDA was up by 25.2% YoY and 31.0% QoQ at INR 1,955 Mn (vs CIE est. of INR 2,006 Mn). EBITDA margin stood at 10.7% (vs CIE est. of 9.2%), expanding by 139 bps YoY and 248 bps QoQ
* PAT was up by 11.8% YoY and down by 0.5% QoQ at INR 1,720 Mn (vs CIE est. of INR 2,105 Mn). PAT margin expanded by 25 bps YoY, reaching 9.4% (vs CIE est. of 9.7%)
View & Valuation:
We remain positive on GRSE, supported by its strong order book, expanding programme pipeline and improving execution opportunities. We estimate Revenue/ EBITDA/ PAT CAGR of 19.2%/ 20.5%/ 18.8% over FY26–FY29E, with operating margin expected to remain broadly stable. We maintain our BUY rating, with target price of INR 3,500, valuing the company at 35x average FY28E–FY29E EPS
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