Multibagger defence stock Garden Reach Shipbuilders & Engineers share price declined over 5% on Tuesday, extending its decline for the third straight session. Garden Reach Shipbuilders shares have been under pressure, experiencing declines in 12 of the last 14 trading sessions. On Tuesday, Garden Reach Shipbuilders shares fell as much as 6.3% to ₹1,800.00 apiece on the BSE.
Garden Reach Shipbuilders share price is down more than 25% in the past one month and it has fallen over 35% from its 52-week high of ₹2,834.60 apiece hit on July 05. Analysts are bearish on the multibagger PSU stock and expect a major downside as they believe all the positives are priced in and returns are capped.
ICICI Securities has a ‘Sell’ rating on Garden Reach Shipbuilders shares with a target price of ₹515 per share, implying a massive downside of nearly 74% from Monday’s closing price.
The company’s order book at the end of Q1FY25 was ₹25,230 crore, and four major contracts worth ₹1,500 - 1,600 crore were executed in Q1. RFPs of projects worth ₹8,500 - 9,000 are likely within a year and there is a healthy prospective pipeline of more than ₹1,30,000 crore beyond that, ICICI Securities noted.
“Going ahead, management has guided for revenue growth of 25-30% for FY25-26 while maintaining its PAT margins at 7.5-8%. Despite our estimates being at the higher end of the management’s guidance, we believe returns are capped,” ICICI Securities said.
Elara Securities reiterated its ‘Sell’ rating on Garden Reach Shipbuilders shares but raised the target price to ₹1,370 apiece from ₹1,180 earlier, expecting a downside of nearly 29%.
“We reiterate Sell, due to deferment of a large order in NGC to FY26 from FY24, which may advance revenue growth beyond FY26, and given 91% stock outperformance versus the Nifty in the past three months. We expect an EPS CAGR of 25% in FY24-27E with a ROE of 27% and a ROCE of 26% in FY25E-27E,” Elara Securities said.
The brokerage firm pared FY25E and FY26E EPS estimates by 22% and 19% on lower gross margin and drop in other income (on delayed ordering for next-generation Corvette).
The state-run defence company Garden Reach Shipbuilders reported a net profit of ₹87.2 crore in the first quarter of FY25, registering a 13.7% growth compared to the same period last year.
The company’s revenue in Q1FY25 increased by 33.6% YoY to ₹1,009.7 crore. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the June 2024 quarter rose by 22% to ₹56.3 crore, while EBITDA margin narrowed to 5.6% from 6.1%, YoY.
Garden Reach Shipbuilders shares have gained over 62% in three months, while the PSU defence stock has given multibagger returns of more than 110% year-to-date (YTD) and over 144% returns in the past twelve months. Garden Reach Shipbuilders share price has surged over 862% in three years.
At 10:30 am, Garden Reach Shipbuilders shares were trading 5.97% lower at ₹1,806.45 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
