Gravita India shares can rise 37%, says Motilal Oswal

Motilal Oswal, a leading brokerage firm, has projected a significant upside for Gravita India Ltd., anticipating a 37% increase in its share price. The brokerage has maintained its 'buy' rating on the stock, setting a price target of ₹2,300 per share. Gravita India's shares had previously closed at ₹1,680.7 apiece.

A key driver of this optimism is the improved availability of domestic scrap, attributed to the implementation of environmental compensation (EC) for extended producer responsibility (EPR) non-compliance. This regulatory change has led to a marked 60% increase in domestic scrap sourcing by Gravita in the financial year 2025, according to Motilal Oswal.

The shift towards domestic sourcing is expected to enhance Gravita's working capital efficiency, improving from 85 days in FY25 to 77 days in FY26, and further to 76 days in FY27. Additionally, it is projected to boost cash flow from operations to ₹360 crore and ₹310 crore in the respective years, up from ₹280 crore in the previous fiscal. This improvement in cash flow is crucial for funding future expansions and meeting operational needs.

Gravita's strategic focus on non-lead segments, including expansions in rubber and lithium ion recycling, is set to bolster revenue growth. These new ventures, currently in the prototype phase, are expected to commence operations within this fiscal year, with a targeted revenue growth at a compounded annual growth rate (CAGR) of 70% from the rubber segment over the next three to four years. Such diversification is aimed at reducing dependency on lead and tapping into emerging markets.

The company's strategy also includes increasing the share of value-added lead products, which offer margins that are 2%-3% higher than base products. The firm plans to raise this share to 50% from the current 35% by FY25. This move is seen as a key growth driver, allowing Gravita to command a premium in the market.

Motilal Oswal values Gravita India at 31 times its FY27 earnings per share (EPS). The sustained increase in domestic scrap availability is expected to boost the market share of organised players, as automotive battery manufacturers are now required to recycle 90% of batteries placed three years ago, up from the previous 70%. This regulatory push is likely to benefit companies like Gravita that are well-positioned to handle increased recycling volumes.

All six analysts covering Gravita have a 'buy' rating on the stock, reflecting broad confidence in its growth trajectory. The company's robust earnings growth is supported by strategic capacity expansions and a heightened focus on value-added products, alongside growth in emerging segments like rubber.

Overall, Gravita India's outlook appears promising, with its strategic initiatives and regulatory support underpinning a positive growth trajectory. The stock's performance, however, has been volatile, with a 20.8% decline over the past month, highlighting the potential risks alongside the anticipated rewards. Investors are advised to consider these dynamics when evaluating the stock's future potential.