Sell Garden Reach Shipbuilders & Engineers, target price Rs 390: ICICI Securities

ICICI Securities has sell call on Garden Reach Shipbuilders & Engineers with a target price of Rs 390.
The current market price of Garden Reach Shipbuilders & Engineers Ltd. is Rs 493.5 .

Garden Reach Shipbuilders & Engineers Ltd., incorporated in the year 1934, is a Small Cap company (having a market cap of Rs 5667.46 Crore) operating in Shipping sector.


Garden Reach Shipbuilders & Engineers Ltd. key Products/Revenue Segments include Contract Revenue, Sale of Products, Sale of services, Scrap, Miscellaneous Income and Other Operating Revenue for the year ending 31-Mar-2022.


Financials
For the quarter ended 30-09-2022, the company reported a Standalone Total Income of Rs 722.84 Crore, up 16.47 % from last quarter Total Income of Rs 620.62 Crore and up 57.81 % from last year same quarter Total Income of Rs 458.04 Crore. Company reported net profit after tax of Rs 58.73 Crore in latest quarter.

Investment Rationale
GRSE stock has given an impressive return of 70% in the past three months, mainly on (likely) robust earnings momentum till FY25 and orders on anvil. However, the brokerage sees earnings sustenance beyond FY25 nebulous as for major potential orders, RFP is yet to be floated, notwithstanding the competition with other shipyards. It re-initiates coverage on GRSE with SELL. Our TP of Rs390 is based on DCF methodology, implying P/E of 6x FY24E EPS, which could be the peak earnings for the company.

Promoter/FII Holdings
Promoters held 74.5 per cent stake in the company as of 30-Sep-2022, while FIIs owned 1.76 per cent, DIIs 8.36 per cent.