Garden Reach Shipbuilders & Engineers Ltd (GRSE) saw an upward revision in its target price by Antique Stock Broking, as the defence PSU surprised positively on the margin front in the March quarter. GRSE delivered higher-than-expected revenue growth, led by execution of frigates and anti-submarine warfare corvettes. Its standalone Ebitda grew 60.8 per cent year-on-year (YoY), supported by a 331 basis points YoY expansion in Ebitda margin to 16.8 per cent.

Key triggers for GRSE stock
Antique Stock Broking said GRSE is L1 in the next-generation corvette order worth Rs 33,000 crore, which should be finalised in Q1FY27. On the non-defence front, the focus is on ship building and green energy platforms such as hybrid ferries, green tugs, which offer decent opportunities for growth. 

GRSE target price 2026 
Antique maintained 'Buy' with a revised target price of Rs 3,141 on GRSE compared with Rs 3,026, earlier, assigning the stock a core target PE multiple of 40 times, based on FY28 earnings. It said GRSE's revenue growth was led by the delivery of the second Frigate under 17A programme. The third and final Frigate is also in advanced stages of delivery. Additionally, delivery of ASW Corvettes (5 pending) have also gained momentum. 

"As a result, the revenue booking is likely to be strong in FY27E as well," it said.

GRSE Q4 margin surprise
Antique Stock Broking said GRSE's  Ebitda margin came in at 16.8 per cent, up 331 basis poits on a YoY basis. The defence PSU said it has done a reassessment of revenue and costs of the projects that are in advanced stages and, as a result, recognised an upward revision in revenue (Rs 51.95 crore) and costs (Rs 45.69 crore, leading to a net increase in profit of the current year. 

"Typically, as a warship project approaches completion, the GRSE management gains better visibility on the project's final profitability. In the absence of time and cost overruns, excess provisions are written back, leading to an uplift in EBITDA margins," Antique explained.

GRSE order visibility 
Antique said GRSE is strongly placed for winning the bid for P-17B Frigates. The Indian Navy is in the process of issuing a RFP for the procurement of seven frigates under the P-17B program. Unlike the earlier practice where projects were awarded on a nomination basis, procurement under P-17B will follow a competitive bidding process. 

"The project is estimated to be valued at Rs 70,000 crore with the L1 and L2 bidders expected to execute four and three frigates, respectively. GRSE is aiming for the L1 position, given its ongoing execution of the P- 17A Frigate program, which provides it with strong technical credentials and execution experience," it sai.

The prevailing order book stands at Rs 17,000 crore, comprising P-17A frigates, ASW shallow water crafts, survey vessels, and NGOPVs. The company is L1 for the next-generation corvette order, valued at Rs 33,000 crore. This order is now at the contractual negotiation stage and should be finalized in current quarter, Antique said.

"Including the P-17B Frigate order, we believe that the order book at the end of FY28E could scale up to be Rs 77,800 crore, providing multi-year revenue visibility. GRSE's current order book and the resulting revenue visibility should support valuations going forward. We maintain BUY," Antique said.