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Gravita India Ltd

| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤11th May 26

Summary : Gravita India reports strong FY26 growth, driven by strategic capacity expansion and diversification into copper and lithium-ion recycling, despite macroeconomic challenges.

Management Perspective positive : I am pleased to share that Gravita ended FY '26 on a strong note, continuing towards its growth trajectory. Gravita demonstrated resilient performance driven by disciplined risk management, agile execution and strong operational capabilities. We are very confident of getting a CAGR of 20%-25% in volume terms consistently over the next three years.

Concall Report Analysis & Insights

Business Overview

  1. Gravita ended FY26 on a strong note, continuing its growth trajectory.
  2. The company delivered a five-year CAGR of 25% in revenue, 49% in EBITDA, and 31% in PAT.
  3. Resilient performance was demonstrated despite macroeconomic uncertainties and elevated logistic costs.
  4. Total installed capacity reached 4.57 lakh metric tons per annum, targeting 8 lakh by FY29.
  5. Diversified into lithium-ion battery recycling and copper segment via acquisition.

Future Growth Prospects

  1. Targeting 8 lakh metric tons per annum capacity by FY29, building a diversified recycling platform.
  2. Commissioned a 6,000 MTPA pilot lithium-ion battery recycling facility, scaling up gradually.
  3. Acquired 99.44% stake in Rashtriya Metal Industries Limited (RML) for copper segment diversification.
  4. Planning a 29,400 MTPA copper recycling facility in Mandvi, Gujarat, to commence within 12 months.
  5. Expanding rubber recycling capacity in India and Romania, with initial capacity coming in H1 this year.

Management Insights

  1. Expansion program is progressing as planned, with total installed capacity at 4.57 lakh MTPA.
  2. Invested INR 49 crore for Mundra lead capacity expansion, funded by internal accruals.
  3. Commissioned a pilot lithium-ion battery recycling facility with INR 14 crore investment.
  4. Acquired Rashtriya Metal Industries Limited for INR 560 crores, diversifying into copper.
  5. Earmarked total CAPEX of INR 1,700 crores through FY29, with INR 372 crores incurred in FY26.

Signs of Skepticism

  1. Aluminum segment's declining trend due to hedging inability and selective sales strategy.
  2. Delay in MCX approval for aluminum hedging, which has been pending for over a year.
  3. Lead division's volume growth of 15% CAGR is weaker than expected despite policy tailwinds.
  4. Unorganized market competition in lead due to 18% GST creating a hurdle for organized players.

Risk Factors

  1. Macroeconomic uncertainties and elevated logistic costs from geopolitical conflicts.
  2. Aluminum segment faced declining trends due to hedging inability and selective sales strategy.
  3. West Asia conflict impacts Q1 margins due to inability to sell value-added products.
  4. Delay in government approvals for lead capacity addition and MCX hedging mechanism for aluminum.
  5. Working capital cycle expected to remain around 85-90 days due to copper imports.

Good To Know

  1. Value-added products contributed 42% to overall revenue, targeting 50% by Vision 2029.
  2. Assigned an ESG rating of 65 by NSC Sustainability Ratings and Analytics Limited.
  3. Industry undergoing supply chain formalization and enhanced compliance lead sourcing.
  4. EPR transactions are becoming more transparent with government-mandated exchange platforms.
  5. New audit mechanisms by Central Pollution Control Board will improve EPR framework.

Key Drivers

  1. Capacity expansion to 8 lakh MTPA.
  2. Diversification into new recycling verticals.
  3. Backward integration in copper segment.
  4. Formalization of recycling industry.

Key Analyst Discussions

Competitive Environment

  1. Copper generation is limited in developing economies, requiring sourcing from developed nations.
  2. Competitors are adding capacity in copper segment, but Gravita focuses on value-added products.
  3. EPR regulations for batteries have industry consensus, unlike other sectors taking longer.
  4. Government initiatives like exchange-only EPR sales and audit mechanisms increase transparency.
  5. Reverse charge mechanism and TDS on battery scrap under discussion to formalize sector.

Market Trends & Consumer Behavior

  1. Government regulations are driving supply chain formalization and compliance in recycling.
  2. Shift from informal to formal sector is progressing due to EPR transparency and exchange platforms.
  3. Lead prices globally were low, impacting domestic collection due to high difference with overseas lead.
  4. Plastic prices surged in Q4 due to disruptions and lack of overseas supply, boosting EBITDA.
  5. EPR portal changes, including MSTC trading and audit mechanisms, will enhance value realization.

Financial Highlights

  1. FY26 revenue grew 10% to INR 4,265 crores; EBITDA grew 12% to INR 452.48 crores.
  2. Q4 revenue grew 13% YoY and 15% QoQ to INR 1,172.76 crores; PAT at INR 91.88 crores.
  3. Total CAPEX guidance increased from INR 1,200 crores to INR 1,700 crores for next 4 years.
  4. Working capital for copper business expected to be 85-90 days, similar to existing 90 days.
  5. Blended tax rate expected to be 17%-18% going forward due to copper business in India.

Product Composition

  1. Lead segment sales grew 7% to 48,889 MTPA, driven by capacity additions and stabilization.
  2. Aluminum segment declined due to hedging inability; volumes expected to pick up with MCX hedging.
  3. Copper business strategy involves consolidating existing RML markets and backward integration.
  4. RML's current product profile includes copper sheets, brass cups, and foils for various industries.
  5. Lithium-ion battery recycling is a pilot project, focusing on black mass initially, with refining to follow.

Strategic Considerations

  1. CAPEX increase from INR 1,200 crores to INR 1,700 crores primarily for copper expansion.
  2. Lead capacity expansion to 800,000 tons, up from earlier 700,000 tons target.
  3. Copper business aims for 40%-50% volume growth this year, with 60,000 MTPA capacity in 2-3 years.
  4. Working capital debt expected to rise to INR 800-900 crores after copper business starts.
  5. Promoter stake dilution was for institutional shareholders and personal liquidity, not open market sale.
Gravita India Ltd (GRAVITA) Concall Report Analysis & Insights | Dhanarthi