Fundamental Analysis of Gravita India

Fundamental Analysis of Gravita India: “What’s good for the environment can be good for the economy.” With this belief and a vision to become the most valuable company in the recycling space globally by 2026, Gravita India has been recycling and creating value for its stakeholders for over 30 years. In this article, we will perform a fundamental analysis of Gravita India and look at its business, finances, future plans, and more.

Fundamental Analysis of Gravita India

About Us

Founded in 1992 by Mr. Rajat Agrwal with a major recycling plant in Jaipur, the company today has diversified its business into manufacturing, international trading, turnkey solutions, plastics and aluminum industries. Gravita India has offices and factories in India, USA, Singapore, Netherlands, Sri Lanka, Ghana, Mozambique, Senegal, Tanzania, Jamaica, Mali, Mauritania and Nicaragua.

Gravita India has one of the largest waste collection networks with over 1,500 scrap collection points and over 2,05,000 MT of scrap collected in FY 22-23. Key supply chain partners include: Reliance Industries Limited, Asian Paints, TATA, Amara Raja, and many others. The waste collection network across the continent is shown in the image below.

We also have a strong customer base globally. They served over 375 customers across 38 countries across the world and recycled over 1,55,000 MT of products in FY 22-23. Their customer base includes major companies such as: Panasonic, Tata Battery, TVS, Luminous, And many others. The table below shows their presence across the continent.

business division

Gravita India is comprised of four main segments:

Lead Treatment (Revenue Contribution: 87.42%): This involves converting lead battery scrap or lead concentrates into secondary lead metal. This secondary lead metal can be further refined and utilized to make a variety of lead-based products.

Aluminum processing (revenue contribution: 6.89%): Aluminum processing includes activities such as trading of Taint Tabor and Tense aluminum scrap and melting aluminum scrap materials to manufacture alloys.

Turnkey solution (revenue contribution: 2.72%): Our turnkey solution is to fully supply the required plant and machinery for your lead manufacturing facility.

Plastic manufacturing (profit contribution: 2.70%): Recycled plastics are produced using post-consumer or post-industrial plastic materials rather than pure resins. Recycling these plastics from previously used consumer products is an effective way to transform the materials into valuable and practical products.

Based on geographical location, almost equal net profit was contributed by domestic and international operations in FY22-23.

Industry Overview

Waste has evolved over time and is now considered a valuable resource that can generate big cash. Waste management is important for both economic and environmental benefits, including energy generation. The global market for waste recycling services is expected to reach approximately $90 billion by 2028 and is expanding. In India, waste management could potentially grow into a $15 billion sector due to industrialization and population growth.

According to Precedence Research and GM Insights, the global recycled lead market is estimated to reach approximately $20.4 billion by 2030, growing at a rate of 3.5% between 2020 and 2026. This suggests a good trend in the global lead recycling sector, especially in the lead sector. Acid battery recycling. Additionally, the increasing importance of environmental protection standards and laws may be due to the expansion of the industry.

India’s secondary aluminum consumption grew at a CAGR of 9-11%, mainly driven by the automotive sector as well as the packaging, consumer durables and construction sectors. Due to cost dynamics, the share of secondary aluminum in the Indian aluminum industry increased from 29-30% in fiscal 2015 to 42-43% in fiscal 2022.

The global plastic recycling market was valued at $44.29 billion in 2022 and is expected to expand to $65.05 billion in 2029.

Gravita India – Finance

Sales and Net Profit

Gravita reported revenue growth of 21% from Rs.2216 Cr in FY22 to Rs.2801 Cr in FY23. The company has grown at a 22.42% 4-year CAGR.

Net profit showed an upward trend, growing by 38% from Rs.148 Cr in FY22 to Rs.205 Cr in FY23. Taking a long-term perspective, the company has grown by 81.02% at a 4-year CAGR.

profit

Operating profit margin decreased by 2.5% from 9.72% in FY22 to 7.21% in FY23.

Gravita reported a 59 basis point increase in net profit margin from 6.7% in FY22 to 7.29% in FY23. This figure is well above the five-year average of 4.46%. This increase can be attributed to increased profitability, as well as risk aversion. Commodity price exposure and foreign exchange exposure ensure stable margins.

rate of return

Return on capital employed remained stable in FY23. Improving industry dynamics, lower working capital, and improving supply and demand are the key drivers of ROCE.

Return on equity was observed to have decreased by 344 basis points from 45.27% in FY22 to 41.83% in FY23. The current ROE is well above the 5-year average. ROE fell, but PAT rose due to debt repayment and increased facility investment.

debt analysis

Debt/equity decreased from 1 in FY22 to .58 in FY23. The average D2E is also less than 2. The ratio decreased due to repayment of current and non-current borrowings.

The interest coverage ratio continues to increase due to loan repayment, which subsequently reduces the principal repayment amount. ICR increased from 5.33 in FY22 to 6.23 in FY23.

Key highlights

• Procurement of raw materials is a big challenge in this industry. The company has consciously positioned itself in areas with easy access to raw materials, thereby reducing its net working capital cycle.
• Continuous hedging of raw material prices ensures stable margins and is immune to price fluctuations.
• Globally, the metal recycling sector is experiencing significant expansion, but this rapid growth comes with its own challenges, including increased competition and the need to embrace digitalization to improve operational efficiency.
• The market faces competition from alternative technologies, especially lithium-ion batteries, which is expected to hinder its growth due to declining costs and technological superiority.
• The Indian battery market is characterized by significant fragmentation as it hosts a large number of unorganized players and poses challenges to the organized players in terms of competition.
• The majority of Gravita’s revenue comes from lead processing.

Gravita India’s future plans

• Gravita aims to build new recycling verticals for rubber, lithium, steel and paper by 2027.
• Gravita aims to achieve more than 25% of its total revenue from non-lead business and plans a capital expenditure of Rs.600+ crore towards this end.
• The company aims to increase its manufacturing capacity to 4,25,000 MTPA by 2026.
• We aim to achieve profitability growth of more than 35% and a sales CAGR of 25% by 2027.

Gravita India – Key Indicators

conclusion

Concluding the article on Gravita India’s fundamental analysis, Gravita India is on a mission to conserve the Earth’s natural resources to mitigate the consequences of climate change and promote a sustainable future for all. As a primarily lead recycling company, the majority of our revenue comes from this industry, but we plan to increase our revenue from other industries as well. We are also exploring opportunities to expand into new recycling sectors such as lithium, steel and paper.

Future prospects are very optimistic as the recycling industry is expected to grow at a rapid pace. The trends in profitability and sales are expected to continue due to the network of suppliers and customers they have created.

What do you think about Gravita India? Please let us know through the comments section.

Written by Ashish Agarwal

by utilizing stock screener, stock heatmap, Backtesting Portfolioand stock comparison The tools on the Trade Brains portal give investors access to comprehensive tools to identify the best stocks, stock market newsBe aware and invest well.