Gravita India jumps 5% as Motilal Oswal initiates 'Buy', projects 24 percent upside

So far this year, shares of Gravita India surged over 78 percent, outpacing benchmark Nifty 50's 11 percent rise

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Shares of recycling player Gravita India are higher by 5 percent after Motilal Oswal initiated a 'Buy' with a potential upside of nearly 24 percent, and said India's expanding recycling industry will have a positive impact on its business.

Gravita India specialises in recycling lead (approximately 88 percent of revenue in FY24), aluminium (around 8 percent), and plastics (about 2 percent). The company also provides turnkey solutions to clients to set up recycling plants.

Gravita India operates 11 manufacturing facilities worldwide—five each in India and Africa, and one in Sri Lanka, and new facilities are under development in Oman and the Dominican Republic, the company has said. Analysts believe these strategically-located facilities offer a competitive advantage by being close to both consumption and procurement areas.

ALSO READ: Buy Gravita India; target of Rs 1,750: ICICI Securities

Looking ahead, analysts at Motilal Oswal anticipate Gravita’s earnings to grow at a Compounded Annual Growth Rate (CAGR) of approximately 31 percent from FY24-27, supported by revenue CAGR of 26 percent and improving adjusted EBITDA margin.

Gravita currently trades at 31x and 23x FY26E/FY27E EPS, with expected Return on Equity (RoE) and Return on Capital Employed (RoCE) of 30 percent and 25 percent respectively by FY27E. Analysts say the company is well-positioned to benefit from India's growing recycling sector, given its established position and competitive advantages.

Key risks include potential supply chain and logistic disruptions, adverse regulatory changes, delays in new facility ramp-ups, and commodity price volatility where the company has not fully hedged.

So far this year, shares of Gravita India surged over 78 percent, outpacing benchmark Nifty 50's 11 percent rise.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.