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Gravita India Ltd

| 3Q FY26 Post Result’s Conference Call

BULLISH SENTIMENT

Report Source

⬤27th Jan 26

Summary : Gravita India reported strong Q3/9M FY26 financial results, is on track with ambitious capacity expansion and new recycling verticals, and maintains a positive outlook despite minor operational delays.

Management Perspective positive : I am pleased to share that Gravita delivered a consistent performance. We are very confident that it will happen now in this quarter itself. Gravita is well-placed for sustainable long-term value creation.

Concall Report Analysis & Insights

Business Overview

  1. Gravita delivered consistent performance in Q3 and nine months FY 2026 across all major business verticals.
  2. Nine-month FY 2026 saw year-on-year growth of 9% in revenue, 15% in EBITDA, and 32% in PAT.
  3. Installed capacity is now approximately 3.40 lakh metric tonnes per annum, progressing towards 7 lakh MTPA by FY 2028.
  4. Q3 FY 2026 revenue was flat at Rs. 1,017 crores, with adjusted EBITDA at Rs. 116 crores (up 13% YoY) and PAT at Rs. 97.67 crores (up 32% YoY).
  5. Lead segment showed steady growth, plastic volumes rebounded 55% Q-on-Q, while aluminum volumes declined due to higher metal prices.

Future Growth Prospects

  1. Targeting over 7 lakh metric tonnes per annum capacity by FY 2028, building a diversified recycling platform.
  2. Earmarked CAPEX of Rs. 1,225 crores through FY 2028 for existing businesses and new verticals.
  3. New recycling verticals include lithium-ion batteries, paper, and steel, targeting 25% ROIC.
  4. Vision 2029 targets include 25% volume CAGR, 35% profitability growth, and ROIC exceeding 25%.
  5. Expects 30-35% increase in EBITDA numbers in the next year and beyond.

Management Insights

  1. Capacity expansion plans are progressing, with delays attributed to government officials' attendance issues, expected to resolve in Q4 FY26.
  2. Margins are maintained by sacrificing some revenue, leveraging arbitrage opportunities from African plants to India.
  3. The company is fully hedged in lead to mitigate price fluctuations, ensuring no impact on the bottom line.
  4. Gravita aims to sell 70% of its products directly to OEMs for higher margins, with long-term tie-ups with major players.
  5. New ventures and expansions must meet a 25% Return on Investment Capital (ROIC) criterion.

Signs of Skepticism

  1. Management attributes capacity approval delays to a 'one-off' issue with government officials, despite ongoing waits for other regulations.
  2. Aluminum volume decline is blamed on scrap withholding due to high prices, but hedging for aluminum is still 'looking at some options'.
  3. While targeting 25% volume CAGR, current 5-year CAGR is 16-17%, with management expecting ramp-up in H1 next year.
  4. Overseas capacity utilization is 65% due to scrap availability issues, but India capacity is 90%.

Risk Factors

  1. Delays in government license approvals for capacity expansion projects in Gujarat.
  2. Aluminum volume decline due to scrap aggregators withholding material during periods of high metal prices.
  3. Commodity price volatility, especially for non-ferrous metals like aluminum, impacts procurement.
  4. New labor laws are expected to have an overall impact of around Rs. 4.2 crores annually from FY 2027.
  5. Overseas capacity utilization is lower (around 65%) due to reliance on local scrap and import limitations.

Good To Know

  1. Gravita Netherlands BV increased its stake in Gravita Europe S.R.L from 80% to 95%.
  2. The regulatory environment is favorable for organized recyclers, with stronger enforcement of BWMR and EPR frameworks.
  3. NITI Aayog recommended strengthening EPR processes and linking data from GSTN portal.
  4. MCX trading for aluminum alloy is under consideration and expected by Q1 FY 2026-2027.
  5. The company has 13 environmentally responsible facilities and a presence in over 70 countries.

Key Drivers

  1. Capacity expansion completion in Q4.
  2. New recycling verticals launch.
  3. Favorable regulatory environment.
  4. MCX aluminum trading approval.

Key Analyst Discussions

Competitive Environment

  1. Gravita's operational cost and yield are better than competitors globally.
  2. The company uses its own project division for continuous process innovation and automation.
  3. Gravita supplies turnkey recycling solutions to other companies, providing a competitive edge.
  4. The company has long-term tie-ups with major OEMs and traders both in India and overseas.

Market Trends & Consumer Behavior

  1. Regulatory environment (EPR, BWMR) is favorable, increasing domestic scrap availability.
  2. Higher metal prices lead scrap aggregators to withhold material, temporarily tightening supply.
  3. MCX trading for aluminum alloy is expected to be implemented by Q1 FY27.
  4. Demand for lead volumes in South Korea and UAE is not saturated for Gravita's current production.
  5. Copper recycling is being seriously considered due to its evolving ecosystem and future requirements.

Financial Highlights

  1. Q3 FY26 revenue was flat YoY and QoQ at Rs. 1,017 crores.
  2. Adjusted EBITDA increased 13% YoY to Rs. 116 crores, with margins at 11.41%.
  3. PAT grew 32% YoY to Rs. 97.67 crores, with PAT margins at 9.60%.
  4. CAPEX incurred Rs. 125 crores in 9M FY26, targeting Rs. 200 crores by FY26 end.
  5. Lead EBITDA per metric tonne was Rs. 23,000, aluminum Rs. 14,215, and plastic Rs. 10,462.

Product Composition

  1. Q3 FY26 volumes: 46,269 tonnes lead, 3,550 tonnes aluminum, 3,160 tonnes plastic scrap.
  2. Lithium-ion and rubber segments are not yet revenue-generating, but lithium-ion is expected in Q4 FY26.
  3. Plastic segment focuses on PP granules tailored to customer packaging requirements.
  4. Capacity expansion for lead (125,000 tonnes) is expected by Q4 FY26.
  5. Aluminum and plastic capacity expansions are planned for next year, post MCX approval for aluminum.

Strategic Considerations

  1. New verticals and expansions target a 25% ROIC.
  2. CAPEX of Rs. 1,200 crores and working capital of Rs. 1,500 crores will be funded by internal accruals and some debt.
  3. The company prioritizes selling to OEMs for higher margins over exchanges.
  4. Gravita is 100% hedged in lead to manage price volatility.
  5. Overall volume growth target is 25% CAGR, with bottom-line growth of 30-35%.
Gravita India Ltd (GRAVITA) Concall Report Analysis & Insights | Dhanarthi