Gravita Q2: consolidated PAT ₹102 Cr trails Street as core Lead profit falls 20% YoY
PAT +6.31% YoY · revenue +37.84% · margins compressing · miss vs street
₹1,427.35 Cr
+37.84% YoY
₹102.03 Cr
+6.31% YoY
7.06%
-2pp YoY
₹14.01
Gravita India's consolidated PAT came in at ₹102.03 Cr for Q2 FY27, up 6.3% YoY and down 4.1% QoQ, missing the ₹105–115 Cr range flagged in our pre-result preview even as revenue of ₹1,427.35 Cr (+37.8% YoY) beat the ~₹1,400 Cr expectation and EPS of ₹14.01 landed inside the ₹14–15 guided band. The headline revenue growth is not organic: the entire increase and more is explained by the new Copper segment (the Rashtriya Metal Industries business, consolidated with control from 12 March 2026), which billed ₹419.83 Cr this quarter against near-nil a year ago. Stripping Copper out, revenue was actually down roughly 2.7% YoY, and the core Lead business — still 59% of revenue — saw both revenue (₹835.07 Cr, -9.9% YoY) and segment profit (₹89.00 Cr, -20.3% YoY) contract, so the adjusted picture is a decline of roughly 14% in underlying (ex-Copper) segment profit against the +6.3% reported PAT growth.
Q2 FY-2027 vs prior quarters
Consolidated OPM was 9.39%, down from 9.85% a year ago (margin compression is the primary YoY read) but a clear sequential recovery from the 7.44% logged in Q1 FY27 — consistent with the 'margin recovery test' framing of our preview, which had flagged a 224 bps EBITDA slide in Q1. NPM similarly eased to 7.06% from 9.04% YoY. Part of the sequential recovery is a Copper story: that segment's margin (segment result/revenue) improved to about 6.9% this quarter from roughly 4.2% in Q1, moving in the direction of management's guided ramp toward ₹60,000/ton copper margins by FY27-end. Aluminium was the organic bright spot, with segment profit up 79.5% YoY to ₹11.74 Cr; other income fell to ₹18.00 Cr from ₹26.32 Cr YoY, a modest additional drag on total income.
The stock went into the print at ₹1,340.3, down 11.6% over the past month of trading.
For context: this is the second-highest quarterly PAT of the last 6 quarters.
FY29 capacity target 800k+ tons from 497k tons; INR1,680 Cr capex through FY29 (₹850 Cr existing, balance new verticals); PAT CAGR 25-30% going forward; copper margins INR55k/ton sustainable, ramping to INR60k by FY27-end, INR70-75k by FY29.
— This quarter: missed
Against the 25-30% PAT CAGR management guided 'going forward' on the Q1 FY27 call, this quarter's 6.3% reported PAT growth — and the roughly 14% YoY decline in segment profit once the new Copper business is excluded — falls well short, reading as a miss against the company's own trajectory rather than a beat. No standalone press release or management commentary specific to this quarter was available in our records to corroborate or contest this read; management gives no quarter-specific guidance on record beyond the FY27 call. The board used the print to declare an interim dividend of ₹7.70 per share (385% of face value, record date 3 November 2026), and the quarter's corporate activity was dominated by international expansion — new wholly-owned subsidiaries incorporated in the USA and Mozambique, and a ₹94.42 Cr investment into RMIL's rights issue — consistent with the FY29 capacity target of 800k+ tons (from 497k tons) and the ₹1,680 Cr multi-year capex plan laid out last quarter, though none of this moved this quarter's P&L materially. Standalone PAT of ₹47.34 Cr versus ₹102.03 Cr consolidated underscores how much of group profit now sits in subsidiaries, primarily the newly consolidated Copper/RMIL business.
W1
Core Lead segment profit (-20.3% YoY this quarter, ~69% of total segment profit) — watch for stabilization vs further erosion next quarter.
W2
Copper/RMIL segment margin trajectory toward management's guided ₹60,000/ton by FY27-end (from ~6.9% segment margin this quarter).
W3
Progress on FY29 capacity target of 800k+ tons (from 497k tons) and ₹1,680 Cr capex plan against the 25-30% PAT CAGR management guided.
Consolidated scope changed: Copper segment (Rashtriya Metal Industries Ltd., control acquired 12-Mar-2026) added ₹419.83 Cr revenue / ₹28.86 Cr segment profit this quarter vs ~nil a year ago (filing Note 8 flags non-comparability); ex-Copper, revenue fell YoY and core Lead segment profit fell 20.3% YoY. GMI partnership ceased operations, no material P&L impact (Note 7); ₹70.10 Cr Customs demand contested, unprovided.
Margin Recovery Test Amid 40%+ Revenue Run
Gravita heads into Q2 with solid recycling momentum but a margin compression overhang from Q1. The Street remains bullish on the long cycle, but Q2 execution on cost control will reset sentiment after the 224 bps EBITDA margin slide.
The Setup
Gravita enters Q2 riding a strong revenue wave—Q1 FY27 surged 42% to ₹1,475 crore, driven by expanded lead recycling and secondary copper offtake. The story has momentum. But the market is fixated on one number: margins. EBITDA margin collapsed 224 basis points year-on-year to 7.4%, sparking an 8% post-result sell-off. Q2 will test whether that was a one-time squeeze or a new operating normal. The cost headwinds—raw material volatility, energy input pressure—are real, but management's commentary on the earnings call and capex plans hint at confidence in stabilization through volume leverage. This preview focuses on what to watch on revenue sustainability and the path to margin recovery.
~₹1,400 Cr
Q1 FY27 was ₹1,475 Cr (±5% seasonal variance typical for metals recyclers); on-plan trajectory for 42% YoY growth.
~₹105–115 Cr
Q1 FY27 net profit was ₹106 Cr (14% YoY growth). Profit growth will hinge on margin recovery; flat margin = flat profit.
7.5–8.5%
Q1 fell to 7.4% from 9.7% in Q2 FY26. Watch for stabilization cues—cost normalization, energy pass-through, or realization improvement.
~₹14–15
Q1 FY27 EPS was ₹14.60. Growth throttled by margin compression; upside if cost leverage kicks in.
A strong quarter = margin stabilization above 8.5% alongside ₹1,400+ Cr revenue, signaling management can sustain the volume growth without further dilution. A weak quarter = margins sliding further or revenue missing ₹1,350 Cr, reopening fears that the price-cost dynamic has shifted permanently. Between those poles lies the base case: revenue on-plan, margins flat to slightly improved as Q2 comparisons roll forward easier YoY bases and Q1's one-time headwinds (energy, lead pricing) normalize.
On Track?
Gravita is executing on growth—Q1 delivered 42% revenue expansion and volume growth is tracking the capex roadmap. But profitability growth has stalled. Q1 net profit (+14%) lagged revenue (+42%), a sign that the company is not converting incremental sales into incremental earnings at the margin the Street expected. Management has ₹64 Cr copper recycling expansion underway in Gujarat (59,200 MTPA new capacity by FY29) and just deployed ₹94 Cr into RMIL (subsidiary) via rights issue, signaling confidence in demand. However, that capex spree also means near-term FCF will be tight, and the Street will want proof that new capacity comes online accretive to returns. FY26 guidance and long-term ROIC targets (the company is targeting 25%) have not been expressly reset; assume management views Q1's margin dip as cyclical, not structural.
What the Street Says
Since Last Quarter
Three tranches of newsflow in the past eight weeks:
Expansion: Gravita approved a ₹64 Cr copper recycling plant in Mundra, Gujarat (59,200 MTPA capacity, phased by March 2029). This builds on LME brand listing approval (announced Q1) for its Mundra lead metal. The company is positioning for the long cycle—copper scrap feeds lithium-ion battery recycling and EV supply chains, a structural tailwind.
Capital allocation: RMIL (subsidiary, 51% owned, material) raised ₹94.81 Cr via rights issue; Gravita committed ₹94.42 Cr pro-rata and also approved a ₹100 Cr corporate guarantee to back RMIL's lending. This is aggressive—signals heavy confidence in RMIL's lead and copper recycling platform or a push to consolidate control before external partners dilute stake. Watch for any margin pressure if RMIL's returns lag group targets.
Geographic expansion: Board approved incorporation of wholly-owned subsidiaries in the USA (Gravita Recyclers USA Inc.) and Mozambique (Green Maputo Recyclers LDA). No capex disclosed, but the move signals long-term strategy to lock in raw material access and geographic diversification outside India regulatory/price risk. Too early to model P&L impact; watch for capex guidance on the call.
No insider buying, promoter pledges, or regulatory issues flagged. Dividends: interim dividend payout expected to be approved alongside Q2 results (board memo on Oct 27). Normal governance.
The Watch List
1 · EBITDA margin direction
Will it stabilize >8%, recover toward FY26 levels (9.7%), or slide further? This is the crux of sentiment. If margins are flat to +50 bps YoY, re-rate upside. If down another 50–100 bps, watch for FY27 guide cut and analyst downgrades.
2 · Subsidiary drag & RMIL performance
Q1 saw closure of Gravita Metal Inc. (effective Aug 1; immaterial impact). But RMIL's consolidated PBT/margin is a new focus—was the ₹94 Cr capex accretive? What's RMIL's standalone Q2 run-rate? Analyst models may hinge on RMIL upside.
3 · Working capital and cash conversion
High capex (₹64 Cr copper plant) + RMIL raise (₹94 Cr) has dented liquidity. Watch net debt, DSO/DPO, and inventory turns on the call. If working capital reversal swings cash flow negative despite earnings growth, that's a red flag for execution risk.
4 · FY27 guidance and capex guidance
Has management revised full-year guidance for revenue, EBITDA margin, or capex? Expected capex for FY27 total and phase-in timeline for the Gujarat facility? This will pin down street modeling for FY27–28 and help assess runway to target prices.
5 · Commodity price & volume sensitivity
With lead, aluminum, and copper all under pressure (global demand fears, China stimulus uncertainty), will management quantify the headwind's magnitude? Are volumes insulated (long-term contracts) or pass-through-linked? The Street's margin confidence rests on this.
The Closing Line
Gravita has built a real growth story—42% revenue expansion on recycling volumes, LME credibility, geographic footprint expansion, and long-cycle tailwinds from EV and circular economy trends. But Q1's margin compression punched it in the face, wiping out a third of the expected profit accretion. Q2 will test whether that was a transient energy/commodity spike or a permanent shift in the cost structure. The analyst consensus (median ₹2,150 target, all buy ratings) is betting on recovery, but the stock's fall to oversold territory (RSI 23) and 109 bps FII outflow YoY suggest the Street is waiting for proof. Watch the EBITDA margin, subsidiary consolidation, and capex tempo on Oct 27 to reset that conviction.
Key dates: Board meeting and result release on Oct 27, 2026. Interim dividend announcement expected. Earnings call likely the same day or next morning.