This Recycling Stock Could Jump 32%, Sharekhan Sees Solid Gains

Sharekhan is betting on the stock of Gravitas India for robust gains going ahead. According to the brokerage, the growth outlook remains intact and the recent correction offers entry opportunity.

Capacity expansion could boost profitability

Gravita India is implementing massive capacity expansion plan of Rs. 500 crore for existing (lead, aluminium, plastic) and new recycling (rubber, copper, paper, steel, e-waste and lithium) verticals. Existing recycling verticals capacity is expected to increase by 1.9x to 425 kt by FY26 and would drive sustainable high-volume growth (management eyes a 25% volume CAGR over next 3 years) while new recycling verticals looks promising from long term growth perspective and has potential to add Rs. 161 crore in EBITDA by FY27E assuming 50% capacity utilisation.

"The management's Vision 2026 is also encouraging given target of 25%+/35%+ revenue/PAT CAGR along with strong 25%+ RoCE. We maintain our Positive view on Gravita and expect a 32% upside potential from current market price. Recent sharp fall in stock price from 52-week high provides entry opportunity," the brokerage has said.

Recent stock price fall an entry opportunity

According to Sharekhan, the stock price of Gravita has declined by 16% from its 52-week high of Rs. 539 crore and provides good entry opportunity to investors as business fundamental remains strong given - 1) Capacity expansion along with diversification in new verticals and 2) Government's focus on circular economy could provide a sustained long runway for growth. "We expect Gravita to clock robust 30% PAT CAGR over FY22-25E and earnings could surprise positively in case of faster ramp-up of new recycling verticals," the brokerage stated.

According to Sharekhan, the management's Vision 2026 is also encouraging given target of 25%+/35%+ revenue/PAT CAGR along with strong 25%+ RoCE. "We maintain our Positive view on Gravita and expect a 32% upside potential from current market price. Recent sharp fall in stock price from 52-week high provides entry opportunity," the brokerage has added.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies and the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.