Target: ₹650

CMP: ₹751.35

The orderbook for Garden Reach Shipbuilders & Engineers (GRSE) stood at ₹23,600 crore, as of December 2023, 1 per cent lower q-o-q. About 94 per cent of the backlog comprised defence shipbuilding, and the balance was commercial ships, ship repair, bridges, and engines.

Within shipbuilding, backlog for three P-17A frigates stood at ₹12,700 crore, for eight anti-submarine warfare shallow water craft (ASW-SWC) at ₹5,000 crore, for three survey vessels ₹1,050 crore, and for four next-generation offshore patrol vessels (NG-OPV) ₹3,400 crore. GRSE aims to maintain the orderbook in ₹23,000-25,000 crore range in the next three years and has also guided to achieve a turnover of ₹300 crore + in FY24, at a growth of about 17 per cent over FY23, followed by 25 per cent CAGR in the next three years (Elara estimate: 30 per cent).

We cut FY24 EPS 2 per cent and FY25/26 EPS 9/6 per cent on lower-than-expected execution in the past nine months, leading to a margin compression. We cut SoTP-TP to ₹ 650 from ₹720, assuming core shipbuilding value of ₹492 at 16x (unchanged) March 2026 P/E, in-line with defence shipbuilding P/E multiple, and a cash value of ₹162 at 8x (unchanged) P/E as we roll forward to March 2026E earnings.