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Business News/ Markets / Stock Markets/  Multibagger Stock: Gravita India gains over 250% in 2 years, more than 2800% since May 2020; good time to invest?
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Multibagger Stock: Gravita India gains over 250% in 2 years, more than 2800% since May 2020; good time to invest?

Gravita India: The shares, valued at ₹269 each just two years ago, have witnessed an astonishing surge of 252%, now trading at the market price of ₹947.80.

Gravita India: Remarkably, the stock has consistently delivered annual returns exceeding 50% over the past few years. In CY20, it yielded a return of 60%, followed by a remarkable 280% in the subsequent year. (Pixabay)Premium
Gravita India: Remarkably, the stock has consistently delivered annual returns exceeding 50% over the past few years. In CY20, it yielded a return of 60%, followed by a remarkable 280% in the subsequent year. (Pixabay)

In the fast-paced world of investing, finding a multibagger stock that can deliver extraordinary returns within a short period of time is the dream of every investor. Such dreams turned into reality for investors of Gravita India as shares delivered a phenomenal return.

The shares, valued at 269 each just two years ago, have witnessed an astonishing surge of 252%, now trading at the market price of 947.80. Furthermore, from their low of 32 each in May 2020, the shares have experienced an extraordinary ascent of 2860% to date.

Remarkably, the stock has consistently delivered annual returns exceeding 50% over the past few years. In CY20, it yielded a return of 60%, followed by a remarkable 280% in the subsequent year. 

This trend persisted with a return of 53% in CY22, and a multibagger return of 144% in CY23. Over the last decade, the stock closed positively in six out of the ten calendar years.

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Specialising in lead, aluminium, plastics, and rubber recycling, Gravita India caters to both domestic and global markets. With an extensive international footprint, the company boasts a robust clientele comprising over 375 customers spanning Asia, the Middle East, Europe, and the Americas, across 38 countries. Concurrently, its operations in India serve more than 230 customers across 22 states.

Earlier in March, the company announced that its subsidiary, Gravita Tanzania, has augmented the capacity of its existing battery recycling unit in Tanzania by 5,000 MTPA, bringing the total capacity to 12,000 MTPA. This development has boosted the total capacity of the Gravita Group to 290,859 MTPA, as per the company's regulatory filing. 

Also Read: Multibagger Stock: Alphalogic Techsys surges over 3600% in 3 years, up 271% this year so far

Brokerage view

In its recent note, domestic brokerage firm ICICI Securities has initiated coverage on the stock with a target price of 1,150 apiece, citing three major macro catalysts for GIL in the near to medium term.

Firstly, it highlighted the promising prospects within the domestic market, emphasising India's current modest 2.2% share in the global metal scrap recycling market valued at USD 500 billion. It underscores India and China's pivotal roles as drivers of recycled lead growth worldwide. 

Secondly, it emphasised the ongoing shift from the informal to the formal sector, particularly with the redefinition of Battery Waste Management Rules (BWMR), the implementation of extended producer responsibility, and stricter enforcement of GST regulations.

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Lastly, it pointed out the potential benefits of formal trading of ADC-12 alloy on MCX, which could enable back-to-back hedging of aluminium, akin to lead. This, in turn, is anticipated to boost capacity utilisation at Indian facilities shortly.

Strong capacity additions

Over the upcoming two years, the brokerage anticipates Gravita India Limited (GIL) to embark on a significant capital expenditure (capex) phase, augmenting capacities across various regions and product lines. 

Consequently, ICICI foresees an overall capacity growth at a CAGR of 19%, reaching 505.5 thousand tonnes per annum (ktpa) by FY27E. Approximately 62% of the incremental capacity is projected to be allocated in India, with the remainder potentially being established in Africa. 

Moreover, 56% of the added capacity is earmarked for lead recycling, with the remainder likely dedicated to other verticals, resulting in lead constituting less than 70% of the total capacity by FY27E, compared to 78% in FY24.

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Furthermore, the brokerage expects the payback period for new capacities to be less than three years, primarily due to the brownfield nature of expansion in most cases.

Looking forward, the management aims to introduce new verticals such as steel and lithium-ion batteries recycling, further diversifying the company's product mix.

Better performance compared to peers 

Gravita India Limited has demonstrated remarkable financial performance compared to its industry counterparts. Over the past four years, GIL has achieved a revenue growth of approximately 22.5% compounded annually (CAGR), while its EBITDA surged at a rate of 35.4% CAGR. 

Moreover, its profit after tax (PAT) experienced an impressive growth of 80.1% CAGR during the same period.

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These growth figures significantly outpaced those of its listed peers in the lead recycling sector, according to the brokerage. 

In FY23, GIL reported a PAT of 204 crore, whereas its competitors Nile and Pondy Oxides & Chemicals reported significantly lower profits after tax, standing at 23 crore and 49 crore, respectively.

 

 

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 making any investment decisions.

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Published: 14 May 2024, 03:58 PM IST
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