Garden Reach Shipbuilders & Engineers Ltd: Breakout of Bullish Up Flag Pattern

Markets opened on a positive note and traded higher. Currently Nifty trading a few points away from the new lifetime high and defence sector stocks like BEL, and HAL showed strong outperformance to the benchmark index. Today we are going to discuss one stock from the defence industry that registered a breakout of the continuation price pattern named “Bullish Up Flag Pattern” by rallying more than 11% in the last trading session.

The stock is Garden Reach Shipbuilders & Engineers Ltd, which is a premier shipbuilding company in India under the administrative control of the Ministry of Defence, primarily catering to the shipbuilding requirements of the Indian Navy and the Indian Coast Guard. GRSE is a diversified, profit-making and the first Shipyard in the country to export warships and deliver 100 warships to the Indian Navy and Indian Coast Guard. The company was founded in 1884 and is headquartered in Kolkata, India.

The company has delivered strong profit growth of 21% and sales growth of 14% CAGR over the last 5 years and has been maintaining a healthy dividend payout of 34.5%.

Technically, the stock is consolidating in the range from December 2022 after hitting a new lifetime high of Rs 556.80. If we draw the trendline from the high of February 01, 2023 (Rs 529.10) and May 16, 2023 (Rs 529.80) we will get the breakout trendline of the consolidation. Interestingly, the stock witnessed strong buying interest from the last few sessions in which it rallied more than 20% in the last 6 trading sessions with strong volumes which is above the average of the last 60 days. This trading action made a close above the breakout trendline and registered a breakout of the continuation pattern named the Bullish up flag pattern with volumes of more than 8 million shares.    

The minimum possible targets of this pattern will be around Rs 690 which is more than 30% from the breakout level (Rs 530). Thus, swing traders and long-term investors can add this stock to their watchlist.