Garden Reach Shipbuilders secures NGC order as revenue momentum peaks in FY27
Garden Reach Shipbuilders & Engineers Ltd.
Reduce
₹2,225
₹2,184.95
₹2,230
0.22%
Investment View and Recommendation
Elara Securities' November 12, 2026 result update on Garden Reach Shipbuilders & Engineers (GRSE) highlights subdued Q2 FY27 revenue growth, a positive margin surprise and the receipt of the Next Generation Corvettes (NGC) order.
Elara upgraded its recommendation to Reduce from Sell after GRSE received the NGC contract, while retaining its Rs 2,230 target price. The CMP was Rs 2,225 as on November 11, 2026, implying no material upside to the target price.
Q2 FY27 Performance
GRSE reported Q2 FY27 revenue of Rs 1,827 crore, up 8.9 per cent YoY and 0.7 per cent QoQ. Elara described revenue as broadly in line with estimates, although execution was likely slower during the quarter. GRSE also launched the first NGOPV and Ocean Research Vessel.
| Metric | Q2 FY27 | YoY change | QoQ change | Vs Elara estimate |
|---|---|---|---|---|
| Revenue | Rs 1,827 crore | 8.9% | 0.7% | Broadly in line |
| PAT | Rs 172 crore | 11.8% | Broadly flat | 7.0% above |
| EBITDA | Rs 196 crore | 25.2% | 31.0% | 25.3% above |
| EBITDA margin | 10.7% | Up 140 bps | Up 250 bps | — |
EBITDA margin expanded to 10.7 per cent, supported by lower operating costs and a 45 per cent YoY reduction in subcontracting costs. Gross margin, however, declined 1,480 basis points YoY to 33.4 per cent because of the execution mix and the bell-curve revenue cycle.
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NGC Order and Execution Outlook
The Ministry of Defence signed a contract with GRSE on November 2, 2026 to build five NGCs, with an order value of about Rs 33,700 crore. Elara expects revenue recognition from the project to begin from late FY28 to FY29.
Elara expects revenue momentum to peak in FY27 as the P17A and ASW SWC orders are expected to be completed during the year. FY28 sales are expected to remain broadly flat as the current order book is exhausted and the new NGC order book begins execution alongside smaller orders.
Management Order Pipeline
Management expects a defence order pipeline of Rs 1.5 lakh crore over the next 12 to 18 months. This includes P17B tenders worth Rs 70,000 crore, landing platform docks worth Rs 35,000 crore, mine countermeasure vessels worth Rs 32,000 crore and smaller tenders.
In non-defence commercial shipbuilding, management expects a Rs 1 lakh crore pipeline, including Very Large Gas Carriers, smaller containers and ships.
Financial Forecasts
Elara maintained its FY27E to FY29E EPS estimates because receipt of the NGC order had already been factored into Q3. The broker forecasts a 6 per cent revenue CAGR over FY26 to FY29E, EPS CAGR of 17 per cent over the same period and average RoE of 30 per cent in FY27E to FY29E.
| Financial year | Revenue | Adjusted PAT |
|---|---|---|
| FY27E | Rs 7,825 crore | Rs 1,062 crore |
| FY28E | Rs 7,899 crore | Rs 1,118 crore |
| FY29E | Rs 8,244 crore | Rs 1,184 crore |
Valuation and Key Risks
Elara's Rs 2,230 target price uses a sum-of-the-parts approach. The valuation comprises core shipbuilding value of Rs 1,869, based on 32 times September 2028E earnings, and cash value of Rs 386, based on 9 times P/E.
Key risks to Elara's view are export orders and smaller commercial shipbuilding orders that are not included in its estimates.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
