Gravita India - Getting The ‘Lead Out’ In Style; Motilal Oswal Initiates Coverage With A Buy

Motilal Oswal Report

We initiate coverage on Gravita India Ltd. with a Buy rating and a target price of Rs 2,350 (based on 35 times Sep’26E earnings per share).

Gravita is one of the key players within the growing recycling industry in India. The company has strong growth visibility led by industry tailwinds and high competitive advantages (strategically located manufacturing units, deep procurement network, diverse global customer base, and lower cost for building new facilities).

The company is incurring significant capex of over Rs 6 billion (Rs 4 billion for the existing segments and Rs 2 billion for the upcoming segments, like Lithium ion, Steel and Paper) on the existing gross block of ~Rs 4.8 billion to more than double the capacity over the next three years (~686K million tonnes per annum by FY27 versus ~303K in FY24).

We believe that with strong industry tailwinds, favorable regulatory policies, the availability of additional hedging mechanisms, and the absence of significant supply chain disruption, the company can strong ramp up the utilization (~30% sales volume CAGR over FY24-27E).

Going forward, we expect the company to report robust earnings growth on the back of:

1. strong growth within the lead recycling segment led by favorable regulatory changes;

2. faster growth from the new segments (aluminum, plastic, and rubber) and addition of the steel and paper segments;

3. robust capacity addition across segments; and 4) a rise in the mix of value-added products.

We estimate Gravita to register a revenue/adjusted Ebitda/adjusted profit after tax compound annual growth rate of 26%/ 29%/ 31% over FY24-27.  Gravita currently trades at 31 times /23x FY26E/FY27E EPS with an RoE/RoCE of 30%/25% in FY27E.

We believe that the company will be a key beneficiary of the growing recycling industry in India and is poised to secure its share within the market led by multiple moats built around over the years.

Key risks

1. Any issues within the supply chain or any logistic disruptions can adversely impact procurement and supply and will lead to higher freight costs and higher inventory days.

2. Unfavorable regulatory changes, or lack of discipline in strictly implementing existing policies (such as BWMR and PWMR), can lead to slower-than-expected growth in demand.

3. A delay in the ramp-up of new facilities will lead to slower-than-expected revenue growth.

4. Downside in commodity prices, where the company has not fully hedged, can lead to losses.

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