Growth Momentum To Pick Up; Maintain BUY
Est. Vs. Actual for Q2FY26: Revenue: BEAT; EBITDA (Adj.): BEAT; PAT: BEAT Changes in Estimates Q2FY26 Result FY26E/FY27E: Revenue: -8%/-10%; EBITDA (Adj.): -7%/-1%; PAT (Abs.): -6%/1%
Recommendation Rationale
• Value-added Products Driving Growth: The company delivered 12% YoY revenue growth, driven by a 4% YoY increase in volumes and improved realizations. Volume growth was supported by a 27% rise in aluminium volumes and a 5% increase in lead volumes, although overall output was partly affected by capacity constraints and deferments linked to GST-related changes. The share of value-added products increased to 47% of total revenue, aiding profitability and realizations. Adjusted EBITDA stood at Rs 112 Cr, broadly in line with the previous quarter, despite a marginal dip in revenues
• Capacity Expansion Expected in H2: Gravita continues to execute its capacity ramp-up plan, under which the current 3.4 Lc MTPA capacity is set to cross 4.4 Lc MTPA by FY26-end (7+ Lc MTPA by FY28).
Key project updates:
Mundra Lead Expansion: Phase I (30,000 MTPA) to be commissioned by Nov’25; Phase II (50,000 MTPA) expected by Jan’26; Lithium-ion Battery Recycling Pilot (Mundra): Progressing well; commissioning expected in Q3FY26.; Rubber Recycling Facility (Mundra): On track for completion by Q4FY26 with meaningful contribution expected from FY27.; Phagi Lead Capacity Enhancement (45,000 MTPA): Expected completion by Dec’26.; Romania facility continues to stabilize, supporting future export-led growth.
Sector Outlook: Positive
Company Outlook & Guidance: The company reiterated its medium-term targets of achieving 25% volume CAGR and 35% profit CAGR, while sustaining ROIC above 25%. Volume traction is expected to strengthen in H2FY26 as new capacities come onstream and the spillover volumes from Q2 are realised in subsequent months. Over the next 3-4 years, management intends to fully leverage growth opportunities across existing and newly launched business lines. Investments in new verticals such as paper and steel will be pursued selectively, based on visibility of sufficient demand potential. In line with this strategy, the company has reduced its capex plan to Rs 1,225 Cr from Rs 1,500 Cr for the next three years, signalling a more disciplined capital deployment approach focused on optimising returns.
Current Valuation: 27x Sept’27EPS (earlier 32x FY27 EPS)
Current TP: Rs 2,500/share (Earlier: Rs 2,600/share)
Recommendation: We maintain our BUY recommendation on the stock.
Outlook
The recycling industry is witnessing structural tailwinds, with increased regulatory focus shifting scrap flows from the unorganised segment to organised players. In this context, the company remains strategically positioned to capitalise on long-term growth opportunities through capacity expansion and deeper penetration across multiple recycling verticals. Supported by a strong balance sheet and prudent capital allocation, the company is set to pursue both organic and inorganic growth pathways. Revenue momentum is expected to be driven by improved scrap availability and incremental capacities, while profitability is likely to scale at a faster pace, supported by an enhanced product mix, higher contribution from value-added offerings, and operating leverage benefits.
