Gravita India Ltd. share price target

We re-iterate BUY on GRAV while upheaving our TP to Rs2,700/share. GRAV targets revenue CAGR of 25% over the next 3-4 years, and generating ROCE of >25%. Company’s business ‘moat’ is scrap procurement.

The GST Council has introduced the reverse charge mechanism (RCM) on supply of metal scrap by a unregistered person to a registered person. About 65% of the lead recycling market is unorganized, which gets meaningful cost advantage.

The reported EBITDA of INR 877mn was 24% ahead of estimates. Beat was mainly due to outperformance in the aluminium segment and better-than-expected volume growth in the lead segment.

Gravita India (GRAV) clocked consol. volume growth of 29% YoY in Q1FY25, led by lead vol. growth of 43% YoY (on a cyclone-impacted base albeit in line with overall guidance). Also, PAT (after MI) grew 29% YoY.

Update Note

Gravita India (GRAV) clocked lead volume growth of 25% YoY in Q4FY24, despite Red Sea challenges, and guided to 25-30% YoY growth in consol. volumes for FY25E. Mgmt. has added iron, steel and paper to its Vision 2028 and reiterated 25% vol./35% earnings CAGR till FY28

Benefiting from regulatory advancements and amendments in Battery Waste Management Rules, GIL India Limited (GIL) is poised to seize the lucrative prospects that lie ahead. Its significant advantage lies in the extensive global and nationwide procurement network, comprising over 1500
touchpoints and 11 recycling plants.

We estimate a 25% revenue CAGR till FY24, driven by ongoing capex plans, EPR battery recycling policy and company’s competitive position in Lead recycling space in India. We expect GIL to post a PAT CAGR of ~23% during FY22-24E driven by efficiencies in the Lead recycling business.