28-Oct-2026 17:23:39
GRAVITA INDIA Q2 CONCALL: REVENUE SURGES 38% YOY TO ₹1,427 CR, COPPER EXPANSION ACCELERATES, ₹1,680 CR CAPEX PLAN REAFFIRMED & LEAD VOLUME RECOVERY EXPECTED FROM Q3
• MANAGEMENT EXPECTS LEAD RECYCLING VOLUMES TO RECOVER FROM Q3 FY27 AS INTERNATIONAL SCRAP PROCUREMENT IMPROVES & NEW SOURCING ARRANGEMENTS BEGIN CONTRIBUTING • MANAGEMENT TARGETS APPROXIMATELY 18–20% ANNUAL LEAD VOLUME GROWTH OVER THE NEXT THREE YEARS, WITH A MEDIUM-TERM CAGR AMBITION OF AROUND 18% • MANAGEMENT EXPECTS SUSTAINABLE COPPER EBITDA OF APPROXIMATELY ₹65–70/KG IN THE NEAR TERM, WHILE LONGER-TERM PROFITABILITY COULD REACH ₹80–90/KG THROUGH BACKWARD INTEGRATION & IMPROVED PRODUCT MIX • MANAGEMENT TARGETS RMIL COPPER CAPACITY UTILISATION OF APPROXIMATELY 65–70% OVER THE NEXT 2–3 QUARTERS VS AROUND 50% DURING H1 FY27 • MANAGEMENT REAFFIRMS ITS ₹1,680 CR CAPITAL EXPENDITURE PROGRAMME THROUGH FY29, INCLUDING ₹815 CR FOR EXISTING BUSINESSES & ₹865 CR FOR NEW VERTICALS • MANAGEMENT TARGETS TOTAL RECYCLING CAPACITY EXPANSION FROM APPROXIMATELY 4.8 LAKH TONNES ANNUALLY TO 8 LAKH TONNES UNDER ITS LONG-TERM VISION 2030 STRATEGY • MANAGEMENT AIMS TO INCREASE DOMESTIC LEAD BATTERY SCRAP SOURCING FROM APPROXIMATELY 26% CURRENTLY TO 40–50% OVER TIME, REDUCING DEPENDENCE ON IMPORTED SCRAP • Q2 CONSOLIDATED REVENUE GREW 38% YOY TO ₹1,427 CR, SUPPORTED BY COPPER BUSINESS CONTRIBUTION, PRODUCT DIVERSIFICATION & HIGHER VALUE-ADDED SALES • Q2 ADJUSTED EBITDA INCREASED 28% YOY TO ₹143.37 CR, WITH ADJUSTED EBITDA MARGIN OF APPROXIMATELY 10%, REFLECTING PROFIT GROWTH BELOW REVENUE GROWTH • Q2 CONSOLIDATED PAT GREW 6% YOY TO ₹102 CR, WITH NET PROFIT MARGIN OF APPROXIMATELY 7.1%, INDICATING PRESSURE ON OVERALL PROFIT CONVERSION • Q2 TOTAL REPORTED SALES VOLUMES INCREASED APPROXIMATELY 3% YOY TO 52,199 MT, WHILE LEAD VOLUMES DECLINED DUE TO SCRAP AVAILABILITY CONSTRAINTS • H1 FY27 REVENUE GREW 40% YOY, EBITDA INCREASED 29% & PAT GREW 10%, SUPPORTED BY DIVERSIFICATION & OPERATIONAL IMPROVEMENTS • VALUE-ADDED PRODUCTS CONTRIBUTED APPROXIMATELY 64% OF CONSOLIDATED SALES, REFLECTING MANAGEMENT'S STRATEGY OF SHIFTING TOWARD HIGHER-MARGIN RECYCLING PRODUCTS • LEAD RECYCLING VOLUMES DECLINED APPROXIMATELY 11% YOY, PRIMARILY DUE TO SCRAP SOURCING DISRUPTIONS LINKED TO WEST ASIA GEOPOLITICAL TENSIONS • MANAGEMENT CLARIFIED THAT LEAD VOLUME WEAKNESS WAS CAUSED BY RAW MATERIAL SHORTAGES RATHER THAN WEAK END-MARKET DEMAND • LEAD SCRAP PROCUREMENT HAS AN APPROXIMATELY 80–90-DAY CYCLE, MEANING NEW SOURCING CONTRACTS REQUIRE TIME TO TRANSLATE INTO ACTUAL PLANT SUPPLIES • RMIL CONTRIBUTED APPROXIMATELY ₹420 CR REVENUE DURING Q2 FY27, WITH EBITDA MARGIN OF 8.5%, SUPPORTING GRAVITA'S EXPANSION INTO COPPER & COPPER ALLOYS • Q2 COPPER EBITDA REACHED APPROXIMATELY ₹84.67/KG, SUPPORTED BY SPECIALISED PRODUCT ORDERS, FAVOURABLE RAW MATERIAL MIX & OPERATING EFFICIENCIES • MANAGEMENT CAUTIONED THAT Q2 COPPER PROFITABILITY WAS EXCEPTIONALLY STRONG & SHOULD NOT BE CONSIDERED THE SUSTAINABLE NEAR-TERM RUN RATE • MANAGEMENT EXPECTS COPPER BACKWARD INTEGRATION THROUGH OWN RECYCLING FACILITIES TO SUPPORT HIGHER SUSTAINABLE EBITDA PER KG OVER THE NEXT 2–3 YEARS • COMPANY PLANS 29,400 MTPA COPPER RECYCLING CAPACITY AT MANDVI, GUJARAT, WITH ESTIMATED CAPEX OF ₹160 CR & COMMISSIONING TARGETED WITHIN 12 MONTHS • COMPANY PLANS ADDITIONAL 59,200 MTPA COPPER RECYCLING CAPACITY AT MUNDRA, GUJARAT, WITH ESTIMATED CAPEX OF ₹64 CR & PHASED COMMISSIONING BY MARCH 2029 • BOTH COPPER EXPANSION PROJECTS ARE EXPECTED TO BE FUNDED THROUGH INTERNAL ACCRUALS, SUPPORTING CAPACITY GROWTH WITHOUT DEDICATED EXTERNAL PROJECT FUNDING • COMPANY APPROVED APPROXIMATELY ₹94.42 CR INVESTMENT IN RMIL'S RIGHTS ISSUE TO STRENGTHEN ITS COPPER & COPPER ALLOY BUSINESS • APPROXIMATELY ₹600 CR OF THE TOTAL ₹1,680 CR CAPEX PROGRAMME HAS ALREADY BEEN SPENT, WITH MANAGEMENT INDICATING THAT MAJOR PROJECTS REMAIN ON TRACK • MANAGEMENT PLANS TO ESTABLISH GRAVITA RECYCLERS USA INC. AS A WHOLLY OWNED SCRAP SOURCING SUBSIDIARY, INITIALLY CAPITALISED AT US$50,000 • US OPERATIONS WILL FOCUS ON LEASED SCRAP COLLECTION & CONSOLIDATION YARDS, DIRECT SUPPLIER RELATIONSHIPS & EXPORTING COLLECTED MATERIAL TO INDIA FOR PROCESSING • MANAGEMENT ESTIMATES DIRECT US SCRAP PROCUREMENT COULD GENERATE APPROXIMATELY 2–3 PERCENTAGE POINTS OF ADDITIONAL MARGIN VS AGGREGATOR SOURCING, AFTER OPERATING COSTS • MANAGEMENT EXPECTS THE US SCRAP SOURCING NETWORK TO BECOME PROGRESSIVELY OPERATIONAL OVER THE NEXT 1–2 YEARS, SUPPORTING RAW MATERIAL SECURITY & COST EFFICIENCY • MANAGEMENT EXPECTS THE PROPOSED GST REVERSE CHARGE MECHANISM FOR SCRAP PROCUREMENT TO BENEFIT ORGANISED RECYCLERS, ALTHOUGH THE RELEVANT NOTIFICATION WAS STILL PENDING AT THE TIME OF THE CALL • MANAGEMENT SEES LONG-TERM GROWTH OPPORTUNITIES IN LITHIUM-ION BATTERY RECYCLING AS ELECTRIC VEHICLE ADOPTION & BATTERY SCRAP AVAILABILITY INCREASE, BUT NO FIRM NEAR-TERM REVENUE OR PROFITABILITY GUIDANCE WAS PROVIDED • MANAGEMENT EXPECTS HIGHER DEMAND FOR EXTENDED PRODUCER RESPONSIBILITY CREDITS AS BATTERY PRODUCERS APPROACH COMPLIANCE DEADLINES, WITH INDICATIVE CREDIT PRICING DISCUSSED AT ₹5.40–18/KG • PLASTIC RECYCLING CONTINUES TO DELIVER STRONG OPERATING MOMENTUM, WHILE ALUMINIUM OPERATIONS BENEFIT FROM AFRICAN SCRAP SOURCING & PROCESSING INFRASTRUCTURE • MANAGEMENT HAS DEFERRED INDIA TYRE RECYCLING EXPANSION TO PRIORITISE COPPER, LITHIUM-ION BATTERIES & SCRAP SOURCING INFRASTRUCTURE • MANAGEMENT CONFIRMED THAT COPPER & LEAD EXPOSURES ARE HEDGED, WHILE ALUMINIUM HAS DIFFERENT HEDGING LIMITATIONS; ALTERNATIVE FUELS ARE ALSO BEING EXPLORED TO IMPROVE COST EFFICIENCY • MANAGEMENT REMAINS POSITIVE ON COPPER INTEGRATION, CAPACITY EXPANSION, DIRECT SCRAP PROCUREMENT & HIGHER VALUE-ADDED PRODUCTS, BUT LEAD SCRAP SHORTAGES, COPPER MARGIN NORMALISATION, WORKING CAPITAL REQUIREMENTS, REGULATORY DEPENDENCE & LARGE CAPEX EXECUTION REMAIN KEY RISKS
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