Shares of Garden Reach Shipbuilders & Engineers (GRSE) Ltd experienced significant fluctuations on Thursday. Initially, the stock surged by 5.47% to reach a high of ₹1,811.20 in early trading. However, as the day progressed, the stock erased its gains and ultimately fell by 7.74% from its peak, reaching a low of ₹1,671.
This decline came despite the announcement that the defence public sector undertaking (PSU) had secured an additional order valued at $54 million for vessels from a German firm. GRSE confirmed that it had signed a contract with Carsten Rehder Schiffsmakler and Reederei GmbH & Co., KG in Germany on June 22, 2024, for the construction and delivery of Multi-Purpose Vessels. This contract includes an option for four additional ships. Consequently, the total order value is projected to reach approximately $108 million for a total of eight vessels. For people looking to invest in stocks, this information can be a key decider.
Technical analysts have expressed a generally bearish outlook for GRSE in the short term. One analyst suggested that investors should refrain from chasing the stock at its current levels, as the potential for upside appears limited. Instead, they recommended a "buy-on-dip" strategy.
Another analyst advised that investors consider entering around ₹1,760-₹1,770, placing a stop-loss at ₹1,720. They noted that upside targets are modest, estimating that the stock may reach between ₹1,860 and ₹1,870. The stock could potentially consolidate within a range of ₹1,700 to ₹1,900.
Osho Krishan, a Senior Research Analyst, pointed out that the stock is currently in a corrective phase, which may lead to further declines. He highlighted ₹1,500 as an intermediate support level, with resistance observed between ₹1,900 and ₹2,000. A decisive breakout above this range could revive interest in the stock.
Ravi Singh, a Senior Vice-President at Religare Broking, echoed similar sentiments, suggesting that investors should only consider purchasing the stock on dips, ideally around ₹1,500, with a target price of ₹1,750. A stop-loss should be set at ₹1,750.
The daily charts indicate a bearish trend for GRSE, with strong resistance at ₹1,813. Analysts noted that a daily close below the support level of ₹1,720 could trigger a downward target of ₹1,353 in the near term. The stock was trading below the 5-day, 10-day, 20-day, 30-day, 50-day, and 100-day simple moving averages (SMAs), while still above the 150-day and 200-day SMAs. The 14-day relative strength index (RSI) was recorded at 34.33, suggesting the stock is nearing oversold territory.
In terms of valuation, GRSE has a price-to-equity (P/E) ratio of 53.49 and a price-to-book (P/B) value of 11.75. The earnings per share (EPS) stood at 32.11, with a return on equity (RoE) of 21.98%. As of June 2024, the Indian government holds a 74.50% stake in the firm, reinforcing its status as a premier warship builder under the Ministry of Defence.
In conclusion, while GRSE secured a significant order, market reactions and technical indicators suggest caution. Investors looking to invest in stocks may want to keep an eye on further developments and potential entry points in this volatile market environment.
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