Bearish Call: Goldman Sachs sees 22% downside in this defence PSU stock; find out why

Detailed summary

Concerns persist over Garden Reach's revenue decline post the financial year 2028. No major deliveries are expected after the P-17A ship delivery in the third quarter, highlighting margin concerns post FY27, Goldman Sachs wrote in its note.

Shares of Garden Reach Shipbuilders & Engineers Ltd. were trading little changed on Thursday, November 12, after global investment banking Goldman Sachs reiterated its bearish recommendation on the stock.

The Defence PSU stock has snapped a three-day gaining streak on Thursday, having declined 0.6% so far.

Goldman Sachs reiterated its "sell" recommendation on the stock along with a price target of ₹1,735 per share. This indicates a downside potential of 22% from its previous closing price.

The investment banking firm said the Garden Reach's second quarter results missed revenue and earnings per share (EPS) estimates, while adding that the ₹32,000 crore next-gen Corvette order supports near-term growth.

Concerns persist over Garden Reach's revenue decline post the financial year 2028. No major deliveries are expected after the P-17A ship delivery in the third quarter, highlighting margin concerns post FY27, Goldman Sachs wrote in its note.

Despite the concerns, Goldman Sachs has raised its Earnings Per Share (EPS) estimates for FY27 and FY28 by 4% and 6%, respectively, on higher NGC order value of ₹32,000 crore compared to estimates of ₹29,000 crore.

Garden Reach Shipbuilders reported its second quarter results on Wednesday.

The company's profit after tax (PAT) increased by 12.4% to ₹172 crore from ₹153 crore last year. Its revenue of ₹1,826.6 crore was up 8.9% from the previous fiscal's ₹1,677 crore.

The company's earnings before interest, taxes, depreciation and amortization (EBITDA) increased 25.3% to ₹195.4 crore from ₹156 crore last year. Its EBITDA margin expanded to 10.7% from 9% in the year-ago period.

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