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Shares of Gardenreach Shipbuilders and Engineers (GRSE) extended their rally into second straight day on Wednesday, freezing at the 20 per cent upper circuit on the BSE. The shares hit their 52-week high level of Rs 787.5 apiece. By comparison, the benchmark S&P BSE Sensex was down 0.2 per cent at 12:15 PM.
During the past two days, the shares have zoomed nearly 33 per cent on the BSE after the company reproted a healthy set of April-June quarter (Q1) earnings on August 11. Around 0.9 million shares have changed hands on the counter on the BSE over the past two days as against an average volume of less than 30,000 shares a day over the past one month.
Given this, the Exchange has sought clarification from Garden Reach Shipbuilders & Engineers Ltd with reference to movement in volume. The reply is awaited.
Meanwhile, in Q1-FY24, GRSE posted a net profit of Rs 76.68 crore, up from Rs 50.18 crore reported in the corresponding quarter of the previous fiscal. Sequentially, the profit rose from Rs 55.29 crore.
Revenue from operations, meanwhile, increased to Rs 755.9 crore from Rs 579.77 crore YoY and Rs 601.16 crore QoQ. GRSE reported Ebitda of Rs 46.1 crore, up 38 per cent YoY with margin at 6.1 per cent.
“The quality of margin remain volatile because of the purchase of base and depot spares for resale-a low value-added work, and the unpredictable jump in project development expenses, which usually hovers around 1 per cent of revenue,” said analysts at Antique Stock Broking.
They added that as all vessels will be launched by the end of the first half of FY24, execution moves to 1.5 per cent every month. GRSE, thereby, should see increased traction in execution in the quarters to come. Note, however, slippage could be led by the fact that physical progress does not complement financial progress. Thereby, 18-20 per cent of Rs 24,000 crore order backlog should help the company clock over Rs 5,000 crore in revenue.
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“We foresee GRSE clocking Rs 3,300 crore in FY24E and Rs 4,700 crore revenue in FY25E. The company is planning to increase ship repair income to 30 per cent of total revenue, which currently is less than 5 per cent. We foresee GRSE clocking 35 per cent CAGR in revenue and 31 per cent CAGR in net profit during FY23-25E,” the brokerage firm said with a ‘BUY’ rating. Their target price of Rs 685, however, is below the company’s current market price.
Over the past one year, shares of the defence company has more than doubled investors’ wealth with a 136 per cent surge in the stock price as against a 9 per cent gain in the benchmark Sensex index.
The rally in defence-related stocks, analysts say, has been accompanied by high valuations, leading to consoldiation in the segment in the near term as companies may not meet investors’ expectations of sustained performance every quarter. READ MORE
