Garden Reach Sh. Q1 FY27 Results (NSE: GRSE)
Signal: Steady quarter
The read
Revenue grew 38.5% YoY driven by higher shipbuilding activity, but gross margin contracted sharply by 1840bps due to surging raw material costs; operating margin (EBITDA) was stable at 13.7% as subcontracting and other costs fell; net profit grew 43.8% YoY aided by higher other income. Key concern: raw material cost surge and sharp drop in trade receivables turnover.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹1,814.62 Cr | 38.5% | -14.4% |
| EBIT | ₹235.29 Cr | 36.1% | |
| Net profit | ₹172.84 Cr | 43.8% | |
| EPS | ₹15.09 | 43.9% | |
| EBIT margin | 12.97% |
P&L walk
Revenue growth of 38.5% YoY driven by higher shipbuilding output, but gross margin collapsed from 42.8% to 24.4% on raw material spike; operating margin held through sharp cuts in subcontracting and employee costs; net profit grew 43.8% aided by higher other income.
Key positives
- Revenue grew 38.5% YoY to ₹1,81,462 Lakh, driven by higher shipbuilding deliveries.
- Net profit increased 43.8% YoY to ₹17,284 Lakh, with net profit margin expanding to 9.52%.
- Interest coverage ratio improved dramatically to 62.50x from 28.39x, reflecting low debt and strong operating profit.
- Current ratio improved to 1.32 from 1.18, indicating better short-term liquidity.
- Inventory turnover improved to 2.23x from 1.42x, suggesting faster conversion of WIP.
Key concerns
- Gross margin collapsed from 42.8% to 24.4% YoY, driven by raw material costs surging to 68.6% of revenue from 51.9%.
- Trade receivables turnover plunged from 17.91x to 6.27x, indicating a sharp increase in receivables relative to revenue, potentially a cash flow concern.
- Sub-contracting charges fell 65.4% YoY and 82.7% QoQ; while beneficial for margins, such a large swing may not be sustainable and could reverse in subsequent quarters.
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