Goodluck India defence expansion and value-added steel products support earnings growth

Investment View and Recommendation

ICICI Securities maintains a HOLD rating on Goodluck India (GIL) with a sum-of-the-parts target price of Rs 535 per share, compared with a CMP of Rs 480. The broker views GIL as having evolved from a steel producer into a precision-engineered steel solutions provider, supported by a rising value-added product mix and a developing defence business.

The stock turned ex-bonus following a 2:1 bonus issue, with August 21, 2026 as the record date. ICICI Direct views the bonus issue positively as it should improve stock liquidity, while noting that the underlying fundamentals remain unchanged.

Core Business Growth Drivers

The core-business thesis is based on value-added product growth, capacity expansion and opportunities across automotive, construction equipment, renewable energy, railways and exports. Installed capacity increased from 3.6 lakh tonnes in FY23 to 5 lakh tonnes in FY25.

• GIL has added 50 KTPA of hydraulic-tube capacity for automotive and construction-equipment applications, where EBITDA margins are stated at 12–13 per cent.
• The company is expanding solar tracker tubes and transmission structures, using its existing capabilities to improve margins in the CRSP business.
• Seven new high-speed rail corridors announced in the FY27 Budget represent an additional growth opportunity.
• Expansion of forging capacity is intended to address export demand and support defence indigenisation.

ICICI Direct estimates standalone revenue and EBITDA CAGR of 13 per cent and 10 per cent, respectively, over FY26–FY28E.

Defence Business Expansion

Defence is expected to become a major earnings driver through subsidiary Goodluck Defence & Aerospace. The subsidiary has commissioned annual capacity for 1.5 lakh 155 mm artillery shells. Its defence operation has an export-shipment order of about Rs 52 crore and an order book of Rs 255 crore for 155 mm long-range empty shells.

Goodluck India plans to add 2.5 lakh shells of capacity, taking total annual capacity to 4 lakh shells by September 2027. The expansion is supported by planned capital expenditure of about Rs 400 crore.

ICICI Direct expects the defence segment, including aerospace, to generate about Rs 650 crore of revenue at approximately 35 per cent EBITDA margin in FY28E. This would represent around 11 per cent of consolidated revenue and 34 per cent of consolidated EBITDA. The broker sees domestic and export opportunities, particularly in Europe amid rising defence spending, supporting the expansion.

Financial Forecasts

The broker forecasts consolidated EBITDA margin to improve from 9.7 per cent in FY26P to 11.4 per cent in FY28E.

Sum-of-the-Parts Valuation

The Rs 535 target price is based on a FY28E sum-of-the-parts valuation. ICICI Direct values the precision pipes and engineering structures base business at 7.5 times EV/EBITDA and the defence business at 20 times EV/EBITDA.

Rating Rationale and Risks

The HOLD rating reflects the expected growth in the core and defence businesses, balanced against the risk that recent equity dilution in the defence subsidiary could reduce GIL's economic interest in the high-margin business. An upcoming defence IPO could nevertheless unlock value through a higher valuation for the subsidiary.

Key risks identified by the report include global geopolitical uncertainty and business volatility. The report also notes the possibility of operating performance exceeding the broker's estimates.