This Ashish Kacholia Backed Small Cap Stock Has Surged 60% This Year, But Analyst Sees Further 35% Rally

Shares of Gravita India have climbed up over 60% since the start of the year, and analysts at Chola Securities see the stock going further up as they expect the company to double its profits in three years.

The Gravita India Analyst: Analysts at Chola Securities initiated coverage on the stock with a ‘buy’ rating and target price of ₹1,008. The target indicates an around 35% upside from the stock’s last closing price of ₹746.85.

The Gravita India Thesis: The analysts said that they expect the company to more than double its ₹204 crore profits in FY23 (April 2022-March 2023) to ₹436 crore by FY26. The brokerage firm also highlighted the company’s rapid and assertive plans for capacity expansion, aiming to elevate the current annual installed capacity from 2.33 lakh MT (metric tonnes) to 4.34 lakh MT by FY26. As per the research note, this ambitious expansion will be predominantly financed through internal earnings.

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The brokerage also pointed out that the implementation of rigorous and essential new environmental regulations is also set to establish an equitable competitive landscape for organised recyclers. At present, the unorganized sector constitutes 65% of India’s lead recyclers, a proportion that will need to transition into the organised sector due to increased law enforcement by governmental bodies.

Expanding further on favourable policy conditions, the analysts talked about a recent transformative government policy that mandates original equipment manufacturers (OEMs) to retrieve a specified quantity of their products post-consumer use and integrate recycled metals into the manufacturing of new goods. The brokerage thinks that this policy shift is poised to significantly amplify growth prospects for recyclers, catalyzing their advancement.

Price Action: Gravita India’s share price was down 1.13% to trade at ₹738.40 in the mid-market hours of trading on Friday.

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