A brokerage firm has issued a 'BUY' recommendation for Gravita India with a target price of Rs 1,900. The company is expanding into copper and aims for significant volume and earnings growth.

Gravita India: Brokerage Reiterates BUY with Rs 1,900 Target

Gravita India Ltd's stock has received a 'BUY' recommendation from a brokerage firm, with a target price set at Rs 1,900, suggesting a significant upside from its current market price of Rs 1,725. The company's market capitalization stands at Rs 12,816 crore.

Reader Takeaway: Strategic copper expansion and strong earnings growth guidance signal upside, but execution risks remain.

What just happened

A brokerage has initiated coverage on Gravita India with a 'BUY' rating and a price target of Rs 1,900. The firm projects the company to achieve a 20-25% CAGR in volumes and a 35% CAGR in earnings over the next three fiscal years.

Why this matters

This 'BUY' rating and target price suggest strong confidence from analysts in Gravita India's future performance. The projected growth rates, particularly in earnings, could lead to substantial shareholder value creation if realized. The company's market capitalization indicates it is a mid-to-large-cap player whose performance can impact investor portfolios.

The backstory

Gravita India is a key player in the recycling industry. The company is significantly expanding its installed recycling capacity, aiming to surpass 8,00,000 MTPA by FY29. A major step in this expansion is the acquisition of a 99.44% stake in Rashtriya Metal Industries Limited (RMIL), marking its entry into the copper and copper alloys sector.

What changes now

With the acquisition of RMIL and increased capital expenditure guidance, Gravita India is set to diversify and strengthen its business. The company has raised its cumulative FY29 capital expenditure guidance to Rs 1,700 crore from Rs 1,200 crore, with Rs 700 crore allocated for the new copper segment. This move is expected to boost overall profitability and help maintain a Return on Invested Capital (ROIC) above 25%.

Risks to watch

The brokerage highlighted two key risks:

• Execution Risk: Any delays in the planned capacity expansion could hinder the projected volume growth.
• Price Volatility: The recycling business is inherently exposed to fluctuations in raw material and end-product prices.

Context metrics (time-bound)

Financial projections show net sales increasing from Rs 3,869 crore in FY25 to an estimated Rs 6,789 crore by FY28E. EBITDA (Adjusted) is projected to grow from Rs 402 crore in FY25 to Rs 671 crore in FY28E. Profit After Tax (PAT) is expected to rise from Rs 313 crore in FY25 to Rs 609 crore in FY28E, with Earnings Per Share (EPS) growing from Rs 42.4 in FY25 to Rs 82.5 in FY28E.

What to track next

Investors will be keen to monitor the successful integration of RMIL and the timely execution of the capital expenditure projects. Progress towards the volume CAGR target of 20-25% and earnings CAGR target of 35% will be crucial indicators.