Garden Reach Shipbuilders & Engineers Ltd. (GRSE) – Q3 FY2025
Value Pick Multibagger Stock to buy
1. Company Overview
Garden Reach Shipbuilders & Engineers Ltd. (GRSE) is one of India’s premier defense public sector shipyards under the Ministry of Defence. With a legacy of over six decades, GRSE has built over 100 warships and numerous commercial vessels. The company is a key supplier to the Indian Navy, Indian Coast Guard, and foreign naval forces. GRSE also manufactures deck machinery, engineering equipment, and pre-fabricated bridges.
2. Q3 FY2025 Financial Performance
| Metric | Q3 FY2025 | Q3 FY2024 | YoY Growth |
|---|---|---|---|
| Revenue from Operations (₹ Cr.) | 1,271.00 | 923.09 | +37.7% |
| Total Income (₹ Cr.) | 1,343.12 | 1,004.61 | +33.7% |
| EBITDA (₹ Cr.) | 151.02 | 126.47 | +19.4% |
| EBITDA Margin (%) | 11.9% | 12.6% | -70 bps |
| Profit Before Tax (₹ Cr.) | 133.76 | 118.67 | +12.7% |
| Profit After Tax (₹ Cr.) | 98.18 | 88.25 | +11.3% |
| EPS (₹) | 8.57 | 7.70 | +11.3% |
Revenue Growth: The revenue jump is attributed to the strong execution of defense shipbuilding contracts.
Profitability: Despite a 37.7% YoY sales growth, net profit grew only 11.3%, indicating margin pressure due to increased raw material costs and subcontracting expenses.
3. Key Financial Ratios
| Metric | Value | Industry Average |
|---|---|---|
| ROCE | 27.4% | 18-20% |
| ROE | 22.2% | 15-17% |
| Debt/Equity Ratio | 0.004 | 0.2-0.5 |
| Net Profit Margin | 8.25% | 10-12% |
| Current Ratio | 1.16 | 1.3-1.5 |
4. Future Growth Plans & Expansion Strategy
1. Order Book Strength & New Contracts
GRSE’s current order book stands at ₹25,000+ Cr., providing multi-year revenue visibility.
Major Projects Include:
- Frigate and Corvette projects for the Indian Navy
- Survey vessels and landing craft utility ships for the Indian Coast Guard
- Potential exports to friendly nations under the “Make in India” initiative
2. Expansion of Shipbuilding Capabilities
Capex Plan: ₹500-600 Cr. over the next three years to expand capacity and improve efficiency.
Strategic Objectives:
- Automation of shipbuilding yards to reduce construction time
- Enhanced R&D investments to develop indigenous ship designs
- Green Energy Initiatives in manufacturing to improve sustainability
3. Focus on Non-Defense Business
GRSE is diversifying into commercial shipbuilding to reduce reliance on defense contracts. Targets include inland water transport vessels, tugs, and ferries for global markets.
5. Capital Expenditure & Strategic Rationale
| Capex Component | Investment (₹ Cr.) | Expected Benefit |
|---|---|---|
| Modernization of shipyards | 350 | Faster shipbuilding |
| Automation & AI integration | 150 | Reduce costs |
| R&D & indigenous ship design | 100 | Competitive edge |
6. Competitive Landscape
| Company | Market Cap (₹ Cr.) | P/E | ROCE | ROE | Dividend Yield |
|---|---|---|---|---|---|
| Garden Reach Shipbuilders | 17,268 | 43.7 | 27.4% | 22.2% | 0.62% |
| Cochin Shipyard | 27,542 | 35.3 | 22.5% | 18.7% | 1.1% |
| Mazagon Dock Shipbuilders | 59,000 | 28.2 | 34.5% | 26.8% | 0.5% |
Takeaway:
- GRSE has a strong ROCE and ROE, but trades at a premium valuation compared to peers like Cochin Shipyard
- Mazagon Dock has a larger market share but GRSE is catching up with strong revenue growth
7. Risk Assessment
| Execution Delays | Potential cost overruns in large projects |
| Raw Material Costs | Higher steel and component prices may squeeze margins |
| Geopolitical Risks | Dependence on government contracts makes it vulnerable to policy shifts |
8. Valuation Analysis
| Market Cap (₹ Cr.) | 17,268 |
| Current Price (₹) | 1,508 |
| 52W High / Low (₹) | 2,835 / 673 |
| P/E Ratio | 43.7 |
| Book Value (₹) | 161 |
| ROCE | 27.4% |
| ROE | 22.2% |
| Debt | ₹9.59 Cr. |
| Dividend Yield (%) | 0.62% |
The current P/E of 43.7x is higher than industry peers, suggesting the stock is priced for strong future growth.
If we assume a 25% earnings CAGR for the next 2 years, a fair forward P/E of 35x indicates potential for continued valuation support.
Investment Thesis
✅ Strong Order Book & Execution Capabilities
✅ Debt-Free & High ROCE/ROE Metrics
✅ Robust Capex Plan for Future Growth
🚨 Recommended: Accumulate on Market Dips
9. Conclusion
Near-Term View
The stock is trading at a high valuation, making it vulnerable to short-term corrections. Best accumulated on market dips.
Long-Term View
With a strong order book and expansion strategy, GRSE is a solid long-term play on India’s naval defense modernization.
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