Shares of a leading recycling company having a presence around the globe and one of the largest lead producer in India surged by 3.7 percent on BSE to Rs. 2,609.9, during the trading session of Friday. This rally was sparked by Axis Securities’ initiation of coverage on Gravita India with a bullish outlook.
With a market capitalisation of Rs. 17,823.5 crores, the shares of Gravita India Limited closed in the green at Rs. 2,581.7, up by nearly 2.6 percent, as compared to its previous closing price of Rs. 2,516.65.
Brokerage Target:
The domestic brokerage firm Axis Securities initiated a ‘buy’ rating on Gravita India Limited and assigned a target price of Rs. 3,000 per share, representing a potential upside of 16 percent from Friday’s closing price of Rs. 2,581.7.
The brokerage believes Gravita provides a dual opportunity to benefit from the significant growth of the recycling industry, while also benefiting from the increasing preference for sustainability and ESG-focused investments.
Brokerage Outlook:
The ‘buy’ recommendation by Axis Securities on the stock is based on several factors, including Gravita’s dominant market share in a growing industry, consistent profitability improvements, regulatory tailwinds, and an expanding range of offerings.
The widespread and strategically positioned network of Gravita allows it to serve customers across geographies, outpacing competitors with a localised presence. With planned capacity additions, the company is well-positioned to benefit from strong tailwinds in the sector.
Currently, the stock trades at 31 times the estimated EPS for FY27, while the brokerage values it at 37 times the same estimate.
As part of its “Vision 2028” strategy for future growth, the company is broadening its focus beyond traditional recycling of lead, aluminum, plastic, and rubber to include lithium, steel, and paper recycling.
Gravita plans to leverage its expertise and capabilities in safe and reliable recycling, along with its existing geographic reach, to smoothly enter new verticals. This diversification is expected to drive revenue growth, enhance cash flows, and improve liquidity.
Under the “Vision 2028” strategy, the company targets to achieve more than 30 percent non-lead business, over 25 percent volume CAGR, above 35 percent profitability CAGR, a 50 percent contribution from value-added products, and over 30 percent renewable power usage.
Gravita is setting up a pilot project for lithium-ion recycling and its first tyre recycling plant in Mundra, both expected to be operational in H1 FY26. The company is also establishing a paper recycling plant, with steel recycling plants anticipated to begin operations by FY27.
Additionally, Gravita has acquired a Waste Tyre Recycling plant in Romania with a capacity of nearly 17,000 MTPA.
The addressable market for these products is largely untapped, providing significant opportunities for Gravita while supporting the diversification of its revenue base.
The brokerage expects that the company’s net sales will increase by 98.3 percent, from Rs. 3,161 crores in FY24 to Rs. 6,267 crores in FY27, while net profit is expected to grow by 131.5 percent, rising from Rs. 242.3 crores to Rs. 561 crores during the same period.
Financials:
The company reported a growth in revenue from operations, experiencing a year-on-year rise of nearly 29.2 percent, from Rs. 703 crores in Q1 FY24 to Rs. 908 crores in Q1 FY25.
Similarly, net profit increased from Rs. 53 crores to Rs. 68 crores during the same period, reflecting a growth of 28.3 percent YoY.
In FY24, the company derived 88 percent of its revenue from the lead segment, 8 percent from aluminium, and 2 percent from plastic.
Gravita India is recognised as one of the largest lead recyclers in the country, holding an 18-19 percent market share in the organized lead recycling sector.
According to sources, the company plans to increase its aluminium recycling capacity to 70,000-80,000 tonnes over the next 2-3 years.
Stock Performance:
The stock has delivered multibagger returns of nearly 178.2 percent of returns in one year, as well as around 159.6 percent returns in the last six months. So far in 2024, the shares of Gravita India have given multibagger returns of about 137.7 percent.
About the company:
Established in 1992, Gravita India Limited is engaged in the business of manufacturing and recycling of lead, aluminium and plastics.
The principal activities of the company are lead processing, aluminium processing, trade (lead products and aluminium scrap) and dealing in turn-key lead recycling projects. Further, the company has also entered into PET product manufacturing.
Written by Shivani Singh
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