Target: 430

CMP: ₹286.4

Gravita's Africa business is a major profit center, generating about 2/3rd of the group's earnings currently. Our recent visit to the company's Senegal and Ghana facilities re-affirmed its growth outlook and strong presence in Africa. We estimate 35 per cent+ each of volume and EBITDA CAGR over FY21-25 in Africa. Reiterate Buy with ₹430.

Africa production volumes contribute about 30 per cent of consol. Volumes, driven by significant automotive scrap availability in the region at a cheap rate (35-45 per cent of LME price). Gravita has an extensive scrap collection network of small suppliers.

The ongoing relocation of the Senegal plant from Sebikotane (4.5ktpa) to Sandiara (4.5ktpa lead + 3ktpa aluminum + 1.5ktpa plastics + new verticals like rubber) is expected to enhance the overall capacity contribution of Senegal by more than 2x over FY25.

Ghana houses Gravita's largest overseas plant, with 16.2 ktpa of lead capacity (about 40 per cent of FY22 Africa capacities), with nearly 14ktpa of expansion planned by FY23, besides the addition of 6.0/3.6ktpa of aluminum/plastics.

We estimate Gravita to record 24 per cent revenue/25 per cent PAT CAGRs in FY22-26 on the back of 27 per cent growth in volume. We value the company using DCF with a Mar'23E TP of ₹430.

Key risks: adverse commodity prices, project delays, power outages and country risks.