GRP Limited — Investor Meet, 26-11-2024: Analysts/Institutional Investor Meet/Con. Call Updates

**Financial Performance:** In Q2 FY25, GRP Limited reported a total income of ₹1,319 million, marking a 15% increase from ₹1,148 million in Q2 FY24. The reclaim rubber segment grew by 9% year-on-year to ₹1,119 million, with a notable increase in domestic consumption up by 10%. However, profit after tax declined 47% to ₹25 million due to higher depreciation and interest costs, and EBITDA decreased 13% to ₹100 million, leading to a margin of 8%.

For H1 FY25, revenue reached ₹2,586 million, representing a 20% year-on-year growth. The EBITDA for the half-year rose 26% to ₹233 million, maintaining a margin of 9%. The gross profit for H1 was ₹1,340 million, an 18% increase, while profit after tax slightly rose by 3% to ₹69 million.

**Future Outlook and Growth Drivers:** Management highlighted strategic initiatives focusing on expanding capacity in sustainable materials, particularly through a ₹250 crore CAPEX investment. This includes projects in reclaim rubber and pyrolysis technology, with completion expected by December 2025. Partnerships with Proparco for funding underline GRP's commitment to sustainable practices.

**Order Book and Operational Updates:** The company is expanding into the recovered carbon black sector, expected to commence operations in Q4 FY25. Current CAPEX incurred stands at ₹24 crore. The capacity for reclaimed rubber is currently under high utilization (around 90%).

**Analyst Q&A Insights (Detailed):**

- **Revenue and Profitability:** Analysts inquired about EPR revenue strategies amid a lack of reported earnings from credits. Management explained they are inventorying EPR credits awaiting clearer market dynamics.

- **Market Position and Competitive Landscape:** Management acknowledged other players entering the reclaim rubber and carbon black spaces, reflecting a growing industry.

- **Operational Challenges or Risks:** The response to declining export volumes was addressed, with gross margins pressured by material cost fluctuations and logistics costs.

- **Capex and Capital Allocation:** Analysts asked about the funding mix for the ₹250 crore CAPEX; management confirmed plans for internal accruals, debt, and potentially equity financing.

**Market or Regulatory Updates:** No significant regulatory impacts were discussed, but management stresses the potential growth from upcoming regulations that may enforce recycling mandates.

**Strategic Focus Areas:** GRP's emphasis on sustainable practices, technological advancement, and reducing raw material dependency drives its strategic agenda. The tone from management suggests optimism regarding upcoming projects.

**Investor Insight:** Despite the short-term challenges reflected in profit margins, GRP's strategic pivots towards sustainability and technology suggest potential for long-term value creation. The financial health and growth initiatives indicate a favorable outlook, warranting a 'buy' position, particularly if operational efficiencies improve and EPR revenues materialize.