Gravita India Ltd: A Comprehensive Stock Analysis

 CMP: 1,823 

About Gravita India Ltd

Established in 1992, Gravita India Ltd is one of the largest lead producers in India. The company's business is organized across four specialized verticals: Lead Recycling (flagship), Aluminum recycling, Plastic recycling, and Turnkey projects. Gravita India Ltd also has expertise in the recycling of used batteries, cable scrap, other lead scrap, aluminum scrap, plastic scrap, etc.

Product Portfolio

Lead Products:

• Lead alloys
• Lead sheets
• Lead bricks
• Red lead
• Lead oxide

Aluminium Products:

• Customized aluminium alloys

Plastic Products:

• Plastic granules
• PET flakes (food grade)

Rubber Products:

• Tyre oil

Turnkey Solutions

Gravita India Ltd offers in-house recycling technology, technical consultancy, and services for recycling. It has a PLC-based control and monitor system for advanced setups and annual maintenance contracts. The company has executed over 70 turnkey projects globally in countries such as Qatar, UAE, Saudi Arabia, Poland, Chile, etc.

Financial Performance

Product-wise Revenue Mix in FY24:

• Lead: ~88%
• Aluminium: ~8%
• Plastic Products: ~3%
• Turnkey Projects: ~1%

Value-added products contributed 45% of total revenue in FY24.

EBITDA Per Tonne – Q3 FY25:

• Lead: ₹19,030/MT
• Aluminium: ₹10,353/MT
• Plastic: ₹20,861/MT

Value Added Products

Gravita India Ltd's value-added products include customized lead alloys, lead sheets, lead bricks, red lead, and lead oxide for industrial and battery applications. In aluminium, they offer customized alloys, while plastic value additions include granules and food-grade PET flakes. These higher-margin products contribute 46% to revenue, and they are targeting to reach 50% by FY27.

Geographical Revenue Split FY24

• India: 68%
• Overseas: 32% (contributing 53% to overall profits)

Manufacturing Units

Gravita India Ltd has multiple facilities across the world, including:

• India Facilities: Jaipur, Jaipur SEZ, Chittoor, Mundra, Kathua.
• Overseas: Ghana, Senegal, Mozambique, Tanzania, Togo, Sri Lanka, Oman, Dominican Republic, Romania.

Manufacturing Capacity

• Lead: 148,500 MT
• Aluminium: 10,800 MT
• Plastics: 8,500 MT
• Tyre Oil: 3,097 KL

Capacity Expansion

The company has an aggressive expansion plan, targeting to reach a capacity of 500,000+ MTPA by FY27. To support this growth, it will incur a capital expenditure of ₹600+ crore.

User Industries

Gravita India Ltd serves various industries, including battery manufacturers, cable manufacturing industries, paint & pigment industries, die casting industry, and plastic industries.

Distribution Network & Client Base

The company has a robust distribution network with 31 own yards and 1,700+ touchpoints globally, facilitating the procurement of 250,000+ MT of scrap. It serves 325+ global customers across 32+ countries and 200+ domestic clients across 20 states.

Order Book

Gravita India Ltd has an order book of 60,000 MT+ as of April 2024.

Subsidiaries

The company has 28 subsidiaries as of FY24.

QIP

Gravita India Ltd raised ₹1000 crore through QIP in H1FY25 for growth initiatives, with ₹245 crore allocated for debt repayment and working capital.

Future Plans

By FY28, Gravita India Ltd envisions 50%+ contribution from value-added products and 30%+ non-lead business revenue. The company plans to venture into new recycling verticals in rubber, lithium, steel, and paper.

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Fundamental Analysis

Financial Strength

Gravita India Ltd has demonstrated strong financial performance with consistent revenue and profit growth. The company's durability score is medium, indicating stable revenues, cash flows, and low debt. Key financial metrics include:

• Total Revenue (Annual): ₹3,238.56 crore (11.9% YoY growth)
• Net Profit (Annual): ₹239.19 crore (18.9% YoY growth)
• Operating Profit Margin (Annual): 8.8%
• ROE (Annual): 28.6%
• ROCE (Annual): 29.1%
• Net Profit Margin (Annual): 7.7%

Valuation

Gravita India Ltd's valuation score is 16, indicating an expensive valuation. The stock has a high P/E ratio of 47.2, which suggests that it is priced higher than its peers. However, the company's strong financial performance and growth prospects justify the premium valuation.

Analyst Recommendations

The recommendation from 7 analysts for Gravita India Ltd is a strong buy with a target price of ₹2,632, representing a 43.7% upside from the current price

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Technical Analysis

Momentum Indicators

Gravita India Ltd has a momentum score of 47, indicating that it is technically neutral. Key technical indicators include:

• RSI (14): 56.5 (neutral)
• MACD: 5.8 (bullish)
• MFI: 71.4 (overbought)
• ATR: 94.9

Moving Averages

Gravita India Ltd is trading above several key moving averages, indicating bullish momentum:

• 5-Day SMA: ₹1,807.1
• 10-Day SMA: ₹1,754.7
• 20-Day SMA: ₹1,693.8
• 50-Day SMA: ₹1,829

Support and Resistance Levels

• Pivot Point: ₹1,860.73
• Support Levels: ₹1,731.9, ₹1,781.9
• Resistance Levels: ₹1,910.8, ₹1,989.6

Conclusion

Gravita India Ltd is a strong buy recommendation based on its robust financial performance, aggressive expansion plans, and positive analyst outlook. The stock's technical indicators suggest neutral momentum, but the overall fundamentals and growth prospects make it a compelling investment opportunity.

Disclaimer:

The information provided on this blog is for educational and informational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any securities. The author is not a SEBI-registered investment advisor or analyst. Readers should conduct their own research and consult with a SEBI-registered financial advisor before making any investment decisions. The blog and its author are not responsible for any financial losses incurred as a result of information provided herein.