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Buy This Multibagger Metal Stock For A Target Price of Rs 600: HEM Securities

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Gravita India Ltd is a global manufacturer & exporter of Lead Metal, Specific Lead alloys, Lead oxides, Lead sheet, Lead Powder. The market capitalisation of this small-cap company is Rs 2,432.55 crore. On the NSE, the company's shares have risen from Rs 99.90 on March 23, 2021 to Rs 344.10 on March 22, 2022, 3:30 pm IST, representing a multibagger return of 244.44 percent in a year. On a year-to-date (YTD) basis, the stock is up by 6.91 percent, and in the previous six months, it has gained by 74.14 percent. HEM Securities, an Indian stock brokerage firm, has issued a buy call on the stock with a target price of Rs 600, representing a potential upside of 74 percent over the current market price. For the stock to reach the target price, the brokerage has set a target period of 24 months.

 

Investment rationale for Gravita India
 

Investment rationale for Gravita India

According to the brokerage "Gravita India Ltd. have grown at impressive CAGR of 27% in topline in last 5 years, and a robust growth of 59% CAGR bottom-line from FY16 to FY21 . Company is expected to continue its growth with robust CAGR of 25% in topline and 35% in bottom-line from FY22-FY24E going forward. Gravita India Ltd. was founded by entrepreneur operating in regional markets which now over time has been able to establish business in India and outside India with plans to take it to higher level. Company have gone down the journey of institutionalizing their companies, professionalizing their management teams and have successfully scaled across different regions within India despite starting as local jewellers."

As per HEM Securities "The Company was able to add 24000 ton in Mundra in FY 21-22 (Phrase 1) and they are coming up with another 24000 ton (Phrase 2) in mundra by June next year, also they are expanding their existing capacity in Africa. Chittor : 20000 ton- Dec 2021 and Ghana: 7000 ton- March 2022. They will start next year from 211000 ton. The main raw materials used for production includes Used Lead Acid Batteries (ULAB), Other Lead Scrap, Aluminium Scrap, and Plastic Scrap. The company collects scrap from more than 20 countries including own scrap collection centers in more than 10 countries. These raw materials are mainly sourced from Asia, the Middle East, Africa, and Central America, etc. at competitive prices."

Buy for a target price of Rs 600

Buy for a target price of Rs 600

The brokerage has claimed "Gravita aims to further diversify into segments such as Rubber, Copper & Brass, Steel, Paper and Lithium-e waste. A new 5.3ktpa Rubber unit in Ghana and a 1.6ktpa Copper-Brass unit in Tanzania are expected to be commissioned by H1CY22. The Mundra facility should see the addition of 24ktpa of Copper capacity by FY25."

HEM Securities has also noted that "The company is also targeting a 90ktpa new Steel recycling facility in Africa by FY24-25, and a 96ktpa Paper unit in Nicaragua by FY25-26. Lithium recycling is aimed by the end of the decade as scrap availability is very low as of now and it is tying up with technology partners in Israel-Europe."

"In FY21 Gravita has posted a strong set of numbers with ROE and ROCE of 21% and 20% each which gives a set of belief in the strong fundamentals of the company. Going forward , we expect Gravita to grow at decent CAGR of 25% in topline while bottom-line is expected to grow at 35% CAGR from FY22 to FY24E. Hence we are initiating coverage on the stock. Currently stock is trading at 18.54x of FY22E EPS while it is trading reasonably at 10.36x of FY23E EPS & 9.27x of FY24E EPS. Hence, we initiate "BUY" on the stock and value the stock at 15.79x FY24 earnings to arrive at the target of Rs 600/- per share," the brokerage has said.

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of HEM Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

Read more about: stocks to buy
Story first published: Tuesday, March 22, 2022, 16:18 [IST]
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