Gravita India Ltd - Will soon become a mid cap
On a strong growth trajectory. Can jump in to ride the wave of growth
Company Overview
Gravita India Ltd is one of the largest lead producer in India established in the year 1992 at Jaipur. Gravita is a manufacturer of lead, lead alloys and lead products, aluminum alloys & plastic granules and offers turnkey solutions for recycling industry and consultancy. Gravita is a globally recognized leader in the domain of lead, aluminum, plastic, and rubber recycling. Gravita offers turnkey solutions for lead acid battery recycling.
It has its offices and plants in India, USA, Singapore, Netherlands, Sri Lanka, Ghana, Mozambique, Senegal, Tanzania, Jamaica, Mali, Mauritania, and Nicaragua.
Share Details
NSE:GRAVITA
Closing Price = 597.95(9-Jun-23)
52 Week High = 639. Trading at 6% below 52 wk high
52 Week Low = 231. Trading at 151% above 52 wk low.
P/E = 20
Market Cap = 4,040 cr ( ~$ 490 million)
Quality: Returns on capital employed in cash
PAT margins are consistent. ROE and ROCE is good. Cash conversion is erratic to say the least. One has to be overlook certain things in a small cap.
As a part of its Vision 2025, Vision 2026 and Vision 2027, the company has guided for a ROCE of 25%+. Vision 2025 was seen first in an investor presentation in Nov 2021. Since FY21, GRAVITA has delivered years of 25%+ ROCE. It gives us confidence in the Vision 2027 guidance of 25%+ ROCE.
Growth
Growth overall has been good. To compound at 25% during the period FY09-23 i.e. 14 years is quite incredible. PAT has also kept in pace with a compounded annual growth rate of 24% during the 14 years of FY09-23.
The issue of cash conversion is seen quite clearly in its free cash flow.
There is confidence that Vision 2027 guidance of 25%+ revenue CAGR and 35%+ profitability growth would be met. As the company has grown, the revenue CAGR and PAT CAGR has not slowed. Past performance of the company indicates that it has the capability to deliver on its Vision 2027.
Growth momentum has been solid. It has not slowed even as the company has grown.
So What????
If I own the stock, I will definitely hold on for the long term till the growth story plays out completely.
If I don’t own the stock, I would like to enter it. A company guiding for 25%+ CAGR revenue growth and 35%+ CAGR profit growth should easily turn into a multi-bagger given that its available at a PE of 20 .
Disclaimer
It is an analysis of the company data and not a stock recommendation
My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company
I look to own good companies at prices where there is a path to market beating returns over decades