Buy Gravita India; target of Rs 1891: ICICI Securities

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • Gravita India's Q2FY27 EBITDA beat was driven by copper, with EBITDA/te jumping 54% QoQ to INR 84,671, while aluminium also posted strong margins.
  • The company is working on diversifying its raw material sourcing, with new geographies starting to contribute from Q3FY27, and domestic sourcing expected to rise to 40-50%.
  • Copper is expected to become an increasingly integral earnings contributor over FY27-28E, with the company building an integrated value chain, including debottlenecking and commissioning new recycling facilities.

Thesis Validation Checklist

  • Investors should watch for lead volume recovery from H2FY27E, driven by new sourcing geographies and domestic RCM-led sourcing.
  • Copper margins are expected to stay well above earlier guidance, driven by a shift to scrap-based raw material, sales mix optimization, and operating leverage.
  • The company's ability to execute on its capex plans, including the expansion of its copper recycling facilities, will be crucial to driving long-term growth.
  • Investors should also monitor the impact of the reverse charge mechanism (RCM) on the company's domestic sourcing and the overall industry dynamics.