Brokerages stay bullish on this smallcap multibagger stock after Q4 beat, see 37% upside. Time to buy?

Multibagger smallcap stock in focus: Domestic brokerage firms have retained their optimistic view on Gravita India, one of the country's largest lead producers, following its March quarter performance, which exceeded their estimates. The strong results reinforced their belief that the company remains on track to achieve its ‘Vision 2029’ targets, supported by capacity expansion initiatives across both domestic and international markets.

They also believe future growth will be driven by the company’s planned entry into new geographies within India, continued focus on increasing the share of value-added products, and rising contributions from non-lead business segments.

Following the company's strong Q4FY25 performance, domestic brokerage firm Axis Securities maintained its 'Buy' call on the stock but trimmed its target price to ₹2,600 apiece from the earlier target of ₹3,000, citing heightened geopolitical risks and macro uncertainties. However, the revised target still indicates a 37% upside from the stock's latest closing price. 

Similarly, Motilal Oswal retained its 'Buy' rating on the stock with a target price of ₹2,300 apiece, while Kotak Institutional Equities maintained its 'Add' rating, trimming the target price to ₹2,175 from ₹2,400, citing lower lead volumes.

As a leading player in India’s rapidly expanding recycling industry, Motilal Oswal said Gravita is well-positioned to deliver strong earnings growth over the medium term, supported by strategic capacity expansions across verticals and geographies, increased focus on value-added products, higher growth in new segments (like rubber), and improved domestic scrap availability driven by favorable regulatory tailwinds.

Kotak noted that the company has multiple levers for volume expansion, including the implementation of an aluminum hedging contract on MCX, use of QIP proceeds for potential M&A, expansion of lead recycling capacity at Mundra by 40% to 0.1 mtpa, setting up domestic rubber and pilot Li-ion battery recycling projects, and scaling up operations in international markets such as Eastern Europe and the Americas.

Axis Securities highlighted that the recent fundraise through QIP will enable Gravita to pursue both organic and inorganic growth opportunities in the evolving recycling sector.

Expansion in both existing and new recycling verticals is expected to drive revenue growth, while profit growth is likely to outpace revenue growth, supported by an improving product mix and stronger operating leverage.

Q4FY25 Earnings Snapshot

The company reported a strong 13% YoY increase in overall volumes, driven by a 62% YoY surge in aluminum and a 12% YoY rise in lead. Value-added products contributed 46% of revenues during the quarter.

Additionally, stricter BWMR and EPR regulations led to a 60% increase in domestically sourced scrap, which rose to 43%. Q4FY25 revenue came in at ₹1,037 crore, up 20% YoY and 4% QoQ, broadly in line with analysts’ estimates of ₹1,042 crore. Adjusted EBITDA also met expectations at ₹108 crore, marking a growth of 17% YoY and 6% QoQ.

EBITDA margin stood at 10.5%, slightly above the estimated 10.2%, improving by 20 basis points QoQ but declining by 29 basis points YoY. Consolidated profit after tax stood at ₹95 crore, registering a robust growth of 37% YoY and 21% QoQ, surpassing expectations by 4%.

Wealth Creator

The shares, valued at ₹506 each just two years ago, have witnessed an astonishing surge of 276%, now trading at ₹1,906. Furthermore, from their low of ₹32 in May 2020, the shares have experienced an extraordinary rise of 5,856% to date.

Established in 1992 in Jaipur, Gravita India specializes in the recycling of lead, aluminum, plastics, and rubber, serving both domestic and international markets. With a widespread global presence, the company boasts a strong clientele of over 375 customers across Asia, the Middle East, Europe, and the Americas, spanning 38 countries.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.