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Rising execution; large orders to be delayed

Revenue rises 69% in Q4FY24

Garden Reach Shipbuilders & Engineers (GRSE IN) Q4 revenue rose 69% YoY to INR 10.2bn, 23% ahead of our estimates, as it is currently in a peak execution cycle phase based on its order backlog. FY24 revenue rose 40% YoY to INR 35.9bn, exceeding guidance by 17%. Current execution includes three P-17A frigates, four survey vessels, eight antisubmarine warfare shallow water craft (ASW-SWC), six patrol boats for Bangladesh, next-generation electric ferry for the West Bengal government, and four next-generation offshore patrol vessels (NGOPV).

Robust pipeline but large next-generation Corvette orders deferred

GRSE's pipeline is supported by upcoming naval projects, such as the request for proposal (RFP) for: 1) eight next-generation Corvette worth INR 360bn (RFP likely in June 2024), 2) two multi-purpose vessels for the Navy worth INR 12bn (RFP likely in Q3FY25), 3) five NGOPV worth INR 30bn (RFP likely in Q4FY25), 4) two coastal research vessels worth INR 5bn, 5)18 next-generation fast patrol vessels (FPV) for INR 50bn with an RFP by CY25-26, and 6) 21 water-jet fast attack craft (FAC) for INR 2bn with an RFP by CY24, and 7) seven P-17 Bravo frigates worth INR 170bn, with an RFP likely by CY25. GRSE also expects orders worth INR 16bn+ in H1FY25 where it is already an L1 bidder.

Valuation: reiterate Sell with a higher TP of INR 1,180

We raise our EPS by 25% for FY25E and 40% for FY26E on execution ramp-up and higher Other income. We raise our TP to INR 1,180 from INR 650 based on a SOTP valuation. We assume core shipbuilding value of INR 577 at 25x (from 16x) March 2026E P/E, and a cash value of INR 337 at 8x (unchanged) P/E as we roll forward to March 2026E earnings. We reiterate Sell, due to deferment of a large order in NGC to CY24 from FY24, which may defer revenue growth beyond FY26, and given 69% stock outperformance vs the Nifty in the past three months. We expect an EPS CAGR of 56% during FY24-26E with a ROE of 24% and a ROCE of 32% over FY25-26E.Please refer disclaimer at

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