JM Financial has issued a ‘Buy’ rating for Gravita India, with a target price of ₹3,068, implying a 21% upside over the next 6-12 months. Gravita India, a leading player in India’s recycling industry, is expected to benefit from its aggressive capex plan, regulatory tailwinds, and entry into new recycling markets in Europe.
Key Investment Rationales
- Capex Plan of ₹600 Crore: Gravita India is set to expand its existing recycling capacity and diversify into non-lead businesses with a ₹600 crore capex plan over FY24-26. The company aims to increase its recycling capacity by 67% to 5 lakh tonnes by FY27 and venture into new verticals such as steel, paper, and plastic recycling, supporting its revenue growth.
- Regulatory Tailwinds: The Battery Waste Management Rules (BWMR 2022) and government-mandated Extended Producer Responsibility (EPR) obligations are expected to drive growth for Gravita in the lead battery recycling space. The stricter regulations could boost the company’s market share, with potential growth in organized players in the sector.
- Entry into European Recycling Market: Gravita India has recently signed an MoU to acquire an 80% stake in a waste tyre recycling plant in Romania with a capacity of 17,000 MTPA. This marks Gravita’s first step into the European market, further expanding its geographical reach and growth opportunities.
Financial Summary (FY24A-FY27E):
- Revenue: ₹3,161 Cr (FY24A) to ₹6,814 Cr (FY27E)
- EBITDA: ₹343 Cr (FY24A) to ₹710 Cr (FY27E)
- EBITDA Margin: 10.8% (FY24A) to 10.4% (FY27E)
- EPS: ₹43.7 (FY24A) to ₹76.7 (FY27E)
- ROE: 31.8% (FY27E)
Key Risks
- Logistics Disruptions: Any significant delays in the ramp-up of Gravita’s expansion plan could impact its revenue growth.
- Aluminium Price Volatility: Volatility in global aluminium prices could lead to margin pressure, affecting profitability in the near term.
Disclaimer: Investments in the stock market are subject to market risks. The views and recommendations provided in this article are based on analysis from JM Financial and do not constitute investment advice. Investors are advised to perform their own research and consult with financial advisors before making any investment decisions. Past performance is not indicative of future results, and the author and publication are not responsible for any losses incurred based on this information. Please read all scheme-related documents carefully before investing.
