PSU multibagger defence stock gets an upgrade from brokerage. Do you own?

However, the target price was unchanged at ₹385, which represents a downside of 9% from the current levels. Shares of GRSE were trading 1.02 per cent higher at ₹422.80 apiece on the NSE in Friday’s late afternoon deals.

“The stock has corrected in line with our expectations and we see the downside relatively limited hereon, as the possibility of earnings going downhill post FY27E is being factored-in,” ICICI Securities said in its report.

The state-owned ship building and repairing company has given multibagger returns to investors in the last one year period. It has surged 111 per cent.

Also, in the last six months, the stock of GRSE has gained nearly 59.09 per cent. Meanwhile, the shares have lost 10 per cent on a year-to-date basis in 2023.

“GRSE stock has delivered negative returns of 14% and 18% over the last one month and three months respectively. At current market price, we believe the stock factors-in most of our concerns pertaining to earnings peaking out by FY25E and lack of firm orders beyond the current orderbook,” the brokerage said.

“We believe there are many opportunities in the pipeline in the medium term. Hence, we upgrade the stock to REDUCE (from Sell). We will keep a close tab on the incremental orders, which are key to the future earnings trajectory,” it added.

During an investor call, the management indicated that the latest orders have been won via competitive bidding, hence margins might be lower than the 7.5 per cent in nomination contracts.

“Despite the efforts at cost control and higher ‘other income’, which has resulted in margins at 8-10%, we do not see margins exceeding 11% in the medium term since ‘other income’ is likely to decline as cash against advance reduces and incremental orders (especially exports) are won through competitive bidding,” the brokerage said.