Gravita India (GRAVITA)

FairStock Score: 62/100 — STEADY

Score breakdown: P/E: 0/3 · ROCE: 1/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Strong profitability with ROE of 18.46% and ROCE of 21.50%
• Low leverage with Debt/Equity of 0.20 and Altman Z-Score of 5.83 indicating financial safety
• Impressive long-term growth: 5-year revenue CAGR of 22.37% and profit growth of 33.47%
• High Piotroski F-Score of 8/9 reflecting solid operating efficiency
• Promoter holding of 55.88% shows aligned ownership interests

Concerns

• Negative free cash flow of ₹-582 crore despite reported profits, a serious red flag for earnings quality
• Rich valuation: P/E of 31.16, P/B of 5.66, and price far above the Graham Number of ₹586.16, leaving no margin of safety
• Low dividend yield of 0.39% offers minimal return to shareholders while waiting for growth
• Sales growth of 11.76% lags profit growth of 33.47%, raising sustainability concerns

AI Analysis

When I look at Gravita India, I see a business that has compounded revenues at 22.37% annually over five years and grown profits by 33.47% recently. That is impressive, but I must separate the quality of the business from the price I pay. The company earns a solid 18.46% ROE and 21.50% ROCE, with a conservative debt-to-equity of 0.20. The Altman Z-Score of 5.83 suggests financial strength, and a Piotroski score of 8 out of 9 points to healthy fundamentals. Promoters holding 55.88% aligns their interests with mine. However, the numbers also raise red flags. Free cash flow is negative at ₹-582 crore despite net profits – that tells me earnings are not fully converting into cash. The latest quarter shows ₹1,017 crore sales and ₹97 crore net profit, roughly a 9.5% margin, but I worry about the widening gap between reported profit and cash generation. Valuation is the bigger problem. At ₹1,587.30, the P/E ratio is 31.16 and price-to-book is 5.66, while the Graham Number stands at only ₹586.16. That gives me a deeply negative margin of safety. The dividend yield is a paltry 0.39%, so I am not being paid to wait. This is a fast-growing enterprise with good capital allocation, but I cannot ignore the price. In Buffett's words, 'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.' Here, I am being asked to pay a wonderful price for a good, but not exceptional, business. Patience is not rewarded at this entry point.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer