GRAVITA - GRAVITA INDIA LIMITED Share Price

Gravita India Ltd. reported a robust performance for Q1 FY '26 with a revenue of INR 1,040 crores, a 15% year-on-year growth. The adjusted EBITDA rose to INR 111.70 crores, reflecting a 22% increase, and the profit after tax (PAT) surged to INR 93.26 crores, marking a 39% increase year-over-year, with a PAT margin of 8.97%. Management highlighted the company's strategic focus on expanding its operational capacity, which currently stands at 3.40 lakh metric tons per annum, with a target to exceed 7 lakh metric tons by FY '28. A capex plan of INR 1,500 crores has been established through FY '28, with INR 1,000 crores allocated for existing businesses and the remainder for emerging sectors such as lithium-ion, paper, rubber, and steel recycling.

Key forward-looking points include a projected volume CAGR of over 25% and profitability growth exceeding 35%. The company aims to grow the non-lead segment to contribute over 30% of total revenue, derive over 30% of energy needs from renewable sources, and reduce energy intensity by over 10%. Notably, the pilot lithium-ion battery recycling unit in Mundra is expected to be operational in Q2 FY '26.

Gravita experienced a 12% total volume growth in Q1 FY '26, driven by improved domestic scrap availability due to government regulations. The EBITDA per ton improved across all segments, with INR 21,790 in lead, INR 17,140 in aluminum, and INR 10,213 in plastics. Management expressed confidence in achieving its volume targets for the fiscal year while balancing profitability alongside growth, positioning the company well for sustainable long-term development.

1. Question: "While revenue and volume growth has remained a little bit lower than expectations, was EBITDA growth due to sourcing efficiencies or semis from Africa?" Answer: "Yes, the reduced volume is partly due to shifting material from our African plants to India. The improved EBITDA stems from increased contributions from value-added products, which reached 47% last quarter. Both factors contributed to higher EBITDA margins."

2. Question: "What can we expect for sustainable EBITDA per ton for lead, given the recent growth?" Answer: "We can expect sustainable margins around INR19 to INR20 per kg moving forward, an increase from earlier projections of INR18 to INR19, as the value-added content has risen."

3. Question: "Can you provide an update on the aluminum alloy listing on MCX?" Answer: "Yes, aluminum on MCX is in process and is expected to complete this quarter. The documentation is complete, and we're hopeful for the first godown to open in the north soon."

4. Question: "What's the expected capacity utilization for aluminum by Q4?" Answer: "Currently, we're at about 5% utilization in aluminum. We anticipate reaching 20% to 30% utilization by Q4, contingent on the MCX hedging mechanism for ADC12 starting."

5. Question: "What volume growth do you expect to achieve from expansions and existing capacities?" Answer: "We're targeting 25% growth, with approximately 15% to 18% from existing capacities and around 10% from new capacity increases. Results from expansions will start showing from Q3."

6. Question: "Will currency fluctuations impact profitability from international operations?" Answer: "Currency fluctuations don't impact us significantly since purchases and sales in Africa are conducted in local currency, but metal prices are in USD. We're fully hedged against metal price changes."

7. Question: "What amount of capex is spent this quarter and planned for FY '26?" Answer: "We spent around INR60 crores in the first quarter. Our overall capex plan is to reach INR375 crores for the year, targeting an addition of 100,000 tons in capacity."

8. Question: "What are your expectations for the rubber segment, considering its margins and revenue potential?" Answer: "We anticipate INR7 to INR8 per kg EBITDA margins in rubber, with revenues projected at INR300-400 crores by FY '27. The margins might improve as volumes pick up."

9. Question: "Can we have guidance on the tax rate for the year?" Answer: "The effective tax rate is approximately 15-16% due to temporary treasury income. Once we allocate this for capex, it will move back to an expected 13-14%."

10. Question: "What capacity increase can we expect in FY '27?"

Answer: "In FY '27, we're targeting an increase of approximately 125,000 to 150,000 tons as part of our wider goal to reach 700,000 tons by FY '28."