Gravita India copper integration and recycling capacity expansion underpin earnings growth

Investment View and Earnings Drivers

Motilal Oswal Financial Services retained its Buy rating on Gravita India after the company's 1QFY27 operating performance was broadly in line with expectations. The broker believes Gravita India is well positioned for earnings growth through recycling-capacity expansion, a higher mix of value-added products, improved domestic scrap availability, integration of the acquired copper business RMIL, backward integration into copper recycling and commercialisation of its lithium-ion pilot project.

The broker's revised target price is Rs 2,100, based on 27 times FY28E EPS, representing a 10% premium to Gravita India's five-year average P/E.

1QFY27 Financial Performance

Higher lead EBITDA per tonne amid scrap-supply constraints and consolidation of the acquired copper business supported EBITDA growth. However, the adjusted EBITDA margin declined year-on-year, while adjusted PAT fell 14% year-on-year.

Segment Performance

Net debt was approximately Rs 150 crore as of June 2026.

Capacity Expansion and Raw-Material Availability

Management said the Middle East conflict disrupted raw-material availability, affecting 15–20% of imports and transshipment volumes. As a result, new lead capacity could not be fully utilised, with the expanded Mundra facility operating at about 50% utilisation.

Gravita India commissioned 40.5 KTPA of capacity at Fagi, Jaipur, taking plant capacity there to 75.8 KTPA. Management indicated peak revenue potential of Rs 50 crore per month at 70% utilisation. Raw-material supply conditions are expected to normalise gradually, which should support utilisation, although the current tight-supply environment has supported lead EBITDA per kg.

Copper Integration and Growth Outlook

Management expects copper EBITDA per kg to increase from about Rs 55 currently to approximately Rs 60 by FY27-end and Rs 70–75 over the following two to three years. The anticipated improvement is expected to come from debottlenecking, product mix, higher utilisation, procurement optimisation and backward integration.

• Copper utilisation is expected to exceed 60% by FY27-end, compared with 50% in 1QFY27.
• RMIL capacity is targeted to double to approximately 60 KTPA over three years.
• Management is targeting copper-segment ROIC of more than 25%.
• Gravita India is establishing sourcing yards and procurement infrastructure in developed markets, including a US operation expected by FY27-end, to reduce reliance on Gulf-origin scrap.
• Domestic procurement represented 35% of sourcing in 1QFY27.

Working-capital days increased to about 95 because of higher copper inventory, inventory in transit and logistics disruption. Total inventory was approximately Rs 1,040 crore. The company stated that its copper and alloy operations are fully hedged against commodity-price volatility. Its long-term credit rating was upgraded to AA from AA-.

Estimates and Valuation

Motilal Oswal expects FY26–28 revenue, adjusted EBITDA and adjusted PAT compound annual growth rates of 37%, 31% and 24%, respectively.

The revised adjusted PAT forecasts are Rs 454 crore for FY27E and Rs 581 crore for FY28E. The Rs 2,100 target price is based on 27 times FY28E EPS.

Key Risks to the Thesis

• Prolonged scrap-sourcing and logistics disruptions.
• Lower capacity utilisation.
• Higher working-capital requirements.
• Slower execution of copper integration or expansion plans.