Thread by @alphaspotcap

Gravita India- A Lead Leader!

Here’s our analysis of the company, the lead sector, it’s business model, financials, future prospects, key risks and more!

A detailed thread🧵👇🏻
#investing #StocksToBuy

(1/20)

About-

• Gravita India Ltd is one of the largest lead producer in India established in the year 1992 at Jaipur.

• Their business is organised across four specialized verticals: Lead Recycling (flagship), Aluminium recycling, Plastic
recycling & Turnkey projects.

(2/20)

Global Lead Market-

• Australia possesses 40% of the world’s reserves followed by China (20%). China is foremost amongst producing countries with about 2.28 MT(48%). The largest single use of Lead today is in the manufacture of Lead batteries, which is about 74%.

(3/20)

Advantage Lead-

• Unlike most other materials, Lead can be recycled indefinitely without the slightest dent in quality, making it the perfect material for circular economy.

More than 50% of Lead used in the production of new Lead
products is sourced from recycled Lead

(4/20)

Indian Lead Market-

The battery industry in India consumes about 70% of Lead & the remaining 30% is used by a large number of industries for various applications, including in pigments & compounds, rolled & extruded products, alloys, cable sheathing & other industries

(5/20)

Few Uses of Lead-

1. Batteries
2. Colouring Pigments
3. Soldering material
4. Sheathing and insulation
5. Roofing
6. Radiation Shielding
7. Semi conductors
8. Lining of acid plants & storage vessels
9. Lead strips are used in making tennis rackets for more weight

(6/20)

Gravita’s journey so far-

1. 1994 - Started Lead Recycling in Jaipur

2. 2001 - 1st overseas recycling unit in Sri Lanka

3. 2010 - Listed on NSE & BSE

4. 2015 - Got into plastic recycling

5. 2016 - Started aluminium recycling

(7/20)

Key Stats-

• 3 Recycling verticals - Lead, plastic & aluminium

• 12 Recycling Plants

• 60000 MT+ Open Orderbook

• 72% Capacity Utilization

• 46% revenue derived from value-added products

• 300+ Global customer base

• 55% growth in domestic scrap
collection

(8/20)

Growing Domestic Scrap Availability-

Gravita has been benefiting from increasing availability of scrap in India. This has reduced its import cost and thus has helped it to reduce its Net Working Capital Cycle to 75 days from 90 days earlier.

(9/20)

Gravita increasing is Domestic Scrap collection-

1. Shift of scrap from Informal to formal for processing through a authorized recycler
2. Contracts with battery manufacturers
3. PAN India collection of scrap from corporates
4. Contracts with various chains of workshops

(10/20)

List of its Customised Value Added Products that’s generating ~45% of Gravitas Revenue-

1. Customised Lead Alloys
2. Lead sheets
3. Lead Bricks
4. Lead Oxide
5. Customised Aluminium Alloys
6. Plastic Granules
7. Pet Flakes- Food Grade
8. Red Lead

(11/20)

Gravitas Future Prospects-

Company has an intent to venture into recycling of new resources, such as e-waste, lithium, rubber & copper,looking at 25%+ revenue contribution by non-Lead
businesses while still expanding core business of lead, aluminium & plastic recycling.

(12/20)

Key Govt Policies that affect Gravita’s business-

• BMWR (Battery Waste Management Rules)

• EPR (Extended Producer
Responsibility)

• Vehicle Scrappage Policy

• GST/e-way bill among others.

As these policies become effective it will benefit Gravita more.

(13/20)

9M22(vs 9M21) Segment Revenue-

1. Lead - ₹1,317 Cr vs ₹856 Cr

2. Aluminium - ₹133 Cr vs ₹59 Cr

3. Plastics - ₹96 Cr vs ₹53 Cr

4. Turnkey Projects-₹4Cr vs ₹2.8Cr

(14/20)

Turnkey Projects-

It refers to something that is ready for use at the turn of a key

Few of its machines

1. Battery Cutting Machine
2. Battery Crushing & Hydro separation System
3. Lead Smelting / Recycling Furnace
4. Pollution Control Equipment
5. Alloying Furnace

(15/20)

It’s main Advantage- High barrier to entry business:

1. Specialist Knowledge
2. Import License
3. OEM Approvals
4. Capability to develop customised products
5. Time& Cost of entry
6. Multinational Procurement Network

(16/20)

Expansion Plans-

1. A new 5.3ktpa Rubber unit in Ghana and a 1.6ktpa Copper-Brass unit in Tanzania by H1CY22.
2. The Mundra facility should see the addition of 24ktpa of Copper capacity by FY25
3. It is tying up with technology partners in Israel-Europe

(17/20)

Key Risks-

1. High impact of commodity prices

2. Dependence on Govt policies

3. Can have huge impact due to macro events and economic cycle

4. Execution Risks

(18/20)

Financials-

1. 27% Revenue CAGR in last 5year
2. 9-10% EBITDA margin
3. 64% PAT CAGR in last 5 years
4. ~60% profit coming from overseas business with only ~25% capital employed
5. Strong hedging mechanism keeping margins intact
6. 19% ROCE (Target of 25% by FY25)

(19/20)

Conclusion-

Gravita is a leading recycling company and has grown at impressive CAGR of 27% in topline in last 5 years and 59% CAGR bottom-line from FY16 to FY21. It has a strong set of fundamentals and is into a business with high barriers to entry.

(20/20)

What is the main risk to the business according to you?

@caniravkaria @Jitendra_stock @AnishA_Moonka @ArjunB9591 @AvadhMaheshwar2 @kuttrapali26 @Arunstockguru

Comment down below!