Buy Gravita India Ltd For the Target Rs.2,500 by Axis Securities Ltd
Growth Momentum To Pick Up; Maintain BUY
Est. Vs. Actual for Q2FY26: Revenue: BEAT; EBITDA (Adj.): BEAT; PAT: BEAT
Changes in Estimates Q2FY26 Result
FY26E/FY27E: Revenue: -8%/-10%; EBITDA (Adj.): -7%/-1%; PAT (Abs.): -6%/1%
Recommendation Rationale
* Value-added Products Driving Growth: The company delivered 12% YoY revenue growth, driven by a 4% YoY increase in volumes and improved realizations. Volume growth was supported by a 27% rise in aluminium volumes and a 5% increase in lead volumes, although overall output was partly affected by capacity constraints and deferments linked to GST-related changes. The share of value-added products increased to 47% of total revenue, aiding profitability and realizations. Adjusted EBITDA stood at Rs 112 Cr, broadly in line with the previous quarter, despite a marginal dip in revenues
* Capacity Expansion Expected in H2: Gravita continues to execute its capacity ramp-up plan, under which the current 3.4 Lc MTPA capacity is set to cross 4.4 Lc MTPA by FY26-end (7+ Lc MTPA by FY28).
Key project updates:
Mundra Lead Expansion: Phase I (30,000 MTPA) to be commissioned by Nov’25; Phase II (50,000 MTPA) expected by Jan’26; Lithium-ion Battery Recycling Pilot (Mundra): Progressing well; commissioning expected in Q3FY26.; Rubber Recycling Facility (Mundra): On track for completion by Q4FY26 with meaningful contribution expected from FY27.; Phagi Lead Capacity Enhancement (45,000 MTPA): Expected completion by Dec’26.; Romania facility continues to stabilize, supporting future export-led growth.
Sector Outlook:
Positive Company Outlook & Guidance: The company reiterated its medium-term targets of achieving 25% volume CAGR and 35% profit CAGR, while sustaining ROIC above 25%. Volume traction is expected to strengthen in H2FY26 as new capacities come onstream and the spillover volumes from Q2 are realised in subsequent months. Over the next 3-4 years, management intends to fully leverage growth opportunities across existing and newly launched business lines. Investments in new verticals such as paper and steel will be pursued selectively, based on visibility of sufficient demand potential. In line with this strategy, the company has reduced its capex plan to Rs 1,225 Cr from Rs 1,500 Cr for the next three years, signalling a more disciplined capital deployment approach focused on optimising returns.
Current Valuation: 27x Sept’27EPS (earlier 32x FY27 EPS)
Current TP: Rs 2,500/share (Earlier: Rs 2,600/share)
Recommendation: We maintain our BUY recommendation on the stock.
Financial Performance
Gravita’s Q2FY26 performance surpassed our estimates on all Fronts. Consolidated revenue came in at Rs 1,036 Cr, up 12% YoY and flat QoQ, against our estimate of Rs 997 Cr. Adjusted EBITDA beat estimates at Rs 112 Cr, marking a growth of 10% YoY and flat QoQ. EBITDA margin stood at 10.8%, slightly above the estimated 10.5%, declining by 14 bps YoY and up 6 bps QoQ. PAT stood at Rs 96 Cr, registering a growth of 33% YoY, surpassing expectations by 10%.
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SEBI Registration number is INZ000161633
