Buy Gravita India Ltd for the Target Rs 2,100 by Motilal Oswal Financial Services Ltd
West Asia crisis dampens volumes, but is favorable for margins Operating performance in line
* Gravita India (GRAV) reported adj. EBITDA growth of 29% YoY, supported by an increase in EBITDA/MT in lead due to supply constraints and consolidation of the acquired copper business.
* The company remains on track to scale installed recycling capacity from 497KTPA currently to 800KTPA+ by FY29. While copper is emerging as a key growth pillar with plans to double RMIL capacity to ~60KTPA, with improving EBITDA/MT to INR70-75k over the next 2-3 years (driven by backward integration, debottlenecking, and product mix) and achieve 25%+ ROIC. Additionally, procurement diversification in developed countries (e.g., the US), expansion into lithium-ion, and a continued focus on increasing value-added products (63% in 1QFY27 vs. 42% in 4QFY26) are expected to support the next leg of growth.
* We largely maintain our earnings estimates and reiterate our BUY rating on the stock with a TP of INR2,100 (premised on 27x FY28E EPS, i.e., at a 10% premium to its five-year average P/E).
Margin strength and copper contribution underpin growth
* Consolidated revenue grew 42% YoY to INR14.8b (est. INR14b) in 1QFY27. Consolidated sales volume grew 4% YoY to 55.5KMT.
* Adjusted EBITDA rose 29% YoY to INR1.4b (est. in-line). Adjusted EBITDA margins contracted ~90bp YoY to 9.8% (est. 10%). Adj. PAT declined 14% YoY to INR1.1b (est. in line).
* Lead business revenue grew 3% YoY to INR9.5b, led by 8% YoY realization growth. Volume stood at 44KMT, EBITDA/MT stood at INR24,181 (+11% YoY) for the quarter, and EBITDA came in at INR1.1b.
* Copper business (RMIL) revenue stood at INR3.8b, volume stood at 4.1KMT, EBITDA/MT was INR55,151, and EBITDA came at INR224m.
* Aluminum business revenue grew 17% YoY to INR1.1b. Volumes stood at 3.4KMT, down 21% YoY. EBITDA/MT grew 47% YoY to INR25,175.
* Plastic business revenue grew 62% YoY to INR266m, volume grew 53% YoY to 3.7KMT, and EBITDA/MT was flat YoY at INR10,197.
* The company’s net debt stood at ~INR1.5b as of Jun’26.
Valuation and view
* As a leading player in India’s rapidly expanding recycling industry, GRAV is wellpositioned to deliver healthy earnings growth, supported by:
1) strategic capacity expansion across verticals and geographies
2) an increased focus on VAPs (63% in 1QFY27 vs. 42% in 4QFY26)
3) increased domestic scrap availability, driven by favorable regulatory tailwinds
4) acquisition of RMIL, one of India’s oldest copper and copper alloy manufacturers, and backward integration in to copper recycling
5) the commercialization of the pilot project of lithium ion.
* We largely maintain our earnings estimates and expect a CAGR of 37%/31%/ 24% in revenue/adj. EBITDA/adj. PAT over FY26-28. We reiterate our BUY rating on the stock with a TP of INR2,100 (premised on 27x FY28E EPS, i.e., at a 10% premium to its five-year average P/E).
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