Shares of Gravita India, one of the largest lead recyclers in India with a market share of 18-19 per cent in the organised lead recycling market, offer good entry point to long-term investors after the recent sharp fall, said domestic brokerage Sharekhan, as it remained bullish on the company’s plan to double existing recycling capacity and its focus on entering new recycling verticals. That, it said, would drive superior earnings CAGR of 30 per cent over FY22-25E along with high return on equity (RoE) of 36 per cent.
Seasoned investor Ashish Kacholia is an investor in Gravita India. He has been raising stake in the company for at least three quarters. He held 2.08 per cent stake in Gravita India in the December quarter compared with 1.96 per cent in September quarter, 1.81 per cent in June and 1.35 per cent in the March quarter.
“Gravita India is a play on regulatory tailwinds in India operation, capacity expansion and long-term benefit of foray into new recycling verticals,” the brokerage said while suggesting a target of Rs 596 on the stock.
The scrip stood at Rs 469.80 in Monday’s trade, up 1.44 per cent. The scrip is down 13 per cent from 52-week high of Rs 539.45 hit on February 13. Sharekhan’s target suggests a 27 per cent potential upside on the counter.
Gravita India shares, Sharekhan said, trade at 13 times FY24 and 10 times FY25E EPS, which is attractive considering strong growth outlook and high return ratios, it said.
The government’s focus on circular economy could provide a sustained growth opportunity while focus to increase non-lead/VAP business share to 25 per cent/50 per cent would act as a key re-rating catalyst, Sharekhan said.
The company has embarked a Rs 500 crore capex plan, which would be spilt equally between existing/new verticals to expand capacity. The management has guided for 2 lakh tonnes (25 per cent YoY growth) of volumes for FY24 and expect to sustain a 25 per cent volume CAGR over the next 3 years.
“New recycling verticals (rubber, copper, paper, steel) has potential to add Rs 161 crore of incremental Ebitda by FY27E and would be important to increase non-lead revenue share to 25 per cent,” the brokerage said.
Sharekhan said Gravita India has robust growth track record and expects the momentum to continue with revenue CAGR of 24 per cent, Ebitda CAGR of 26 per cent and PAT CAGR of 30 per cent over FY22-25E along with strong RoE growth o 35 per cent and RoCE of 29 per cent.
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