Gravita India Limited: Q1FY25 Earnings Call Highlights
Positioned for growth, with a clear roadmap for expansion & profitability improvement. Investments in new verticals make it attractive for investors looking for exposure to the recycling sector
gravitaindia.com | NSE: GRAVITA
Strong Q1 Performance:
Revenue grew by 29% YoY to INR 908 crores.
Adjusted EBITDA increased by 33% YoY to INR 91.24 crores.
PAT grew significantly by 29% YoY to INR 67.33 crores.
Value-added products contributed 47% of revenue, in line with the company's goal of reaching 50%.
Key Business Highlights:
Domestic Scrap Sourcing: Gravita sourced over 40% of its scrap domestically in Q1 FY25, indicating a 50% YoY increase.
Aluminum Hedging: The company is working on a hedging mechanism for aluminum, similar to its lead hedging strategy, aiming to stabilize margins.
New Verticals: Gravita is expanding into new areas like lithium-ion recycling, steel recycling, and paper recycling.
Sustainability Initiatives: The company is committed to increasing its non-lead business share, utilizing renewable energy, and reducing energy consumption.
Growth Outlook:
Volume CAGR: Gravita targets a volume CAGR of 25%.
Profitability Growth: The company aims for a profitability growth CAGR of 35%.
ROCE Target: ROCE is projected to exceed 25%.
Capacity Expansion: Gravita plans to add significant capacity in FY25, with the aluminum plant in Ghana expected to come online shortly.
Financial Aspects:
Capex: FY25 capex is estimated at INR 180 crores, with INR 140 crores allocated to existing verticals and INR 40 crores for new verticals.
Funding: The capex will be primarily funded by internal accruals, with minimal debt taken for working capital.
Net Debt: Net debt stands at INR 470 crores, slightly higher than the previous quarter due to increased working capital.
Working Capital Days: Working capital days have improved to 80 days from 85 days in Q4 FY24 due to increased domestic scrap sourcing.
Key Points for Investors:
Strong Growth Prospects: Gravita's focus on expanding its existing verticals and entering new markets like lithium-ion recycling positions it for continued growth.
Improved Profitability: The company is expected to see significant profitability gains due to increased value-added product content, economies of scale, and the higher profitability of new verticals.
Stable Margins: The company's hedging strategy, coupled with stable pricing contracts for aluminum in India, ensures stable margins.
Sustainable Practices: Gravita's commitment to sustainability, including increased renewable energy usage, positions it as a responsible and forward-looking company.
Expansion into New Verticals: The foray into lithium-ion, steel, and paper recycling offers diversification and potential for future growth.
Overall, Gravita appears well-positioned for sustained growth, with a clear roadmap for expansion and profitability improvement. The company's focus on sustainability and strategic investments in new verticals make it an attractive prospect for investors looking for exposure to the recycling sector
Source: Link to Earning Call Transcripts
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