Gravita India shares fall 7% as margin pressure overshadows Q1 growth

Shares of Gravita India fell as much as 7% on Tuesday, July 28, after the company's June-quarter earnings showed strong revenue and profit growth. Still, operating margin came under pressure following the consolidation of its recently acquired copper business.



The company on Monday reported a 42% year-on-year increase in revenue, including other income, to ₹1,523 crore, while Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) rose 20% to ₹157.6 crore. Net profit increased 14% to ₹106.4 crore.

However, EBITDA margin narrowed to 10.3% from 12.2% a year ago, reflecting the impact of the newly consolidated copper business, which analysts said is dilutive to margins despite supporting revenue growth.

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Revenue and EBITDA also included other income, which comprised hedging-related gains that analysts consider part of the company's core business.

The lead business, Gravita's largest segment, reported a 3% increase in revenue to ₹955 crore, while EBIT declined 5% to ₹110 crore. Revenue from the aluminium business rose 17% to ₹110.6 crore, with EBIT jumping 73% to ₹11.4 crore. The plastics segment continued to post strong growth, with revenue rising 62% and EBIT surging 262% year-on-year.

The newly acquired copper business contributed ₹376 crore in revenue and ₹15.7 crore in EBIT during the quarter.

Despite the margin dilution, the company's lead segment continued to perform strongly, with EBITDA per metric tonne at ₹24,181, above management's guidance of ₹19,000-20,000 per metric tonne and higher than ₹20,300 reported in the March quarter.

Overall, analysts described the quarter as largely in line with estimates, with robust profitability in the core lead business offsetting the lower-margin contribution from copper.

Following the June quarter results announcement, shares of Gravita India were trading at ₹1,671.60, down 6.55%, as of 10:54 am on Tuesday. The stock has gained more than 8% over the last six months, while declining about 9% so far this year.