Top 5 stocks in the plastic and tyre recycling ecosystem

Nevertheless, this rapid development brings with it a significant challenge: a rising tide of waste.

Increased consumerism, urbanisation, and the pickup in industrial activity in recent years have fuelled a waste crisis that’s now threatening to overshadow the country’s progress.

The plastic industry, once hailed for its innovation and convenience, now faces mounting criticism as the environmental toll of its products becomes impossible to ignore.

Similarly, the tyre industry, vital to global transportation, is facing scrutiny over its significant environmental impact. While the automobile sector is booming with rapid sales of top model vehicles, discarded tires which take decades to decompose, often end up in landfills or illegal dumps.

Amid this environmental reckoning, the importance of recycling has never been more apparent.

Coupled with the nation's burgeoning economy and urbanisation, which continue to generate massive waste volumes, the recycling industry is poised for exponential growth in the coming years.

Indian companies are leading the way with innovative recycling solutions.

In today’s article, we will look at two segments of the recycling industry – plastic recycling and tyre recycling.

Plastic recycling

In recent years, these companies have garnered attention for their efforts towards plastic recycling -

#1 Ganesha Ecosphere Ltd

Ganesha Ecosphere is a leader in India’s recycled polyester market, specialising in the production of RPSF (Recycled Polyester Staple Fiber) from waste PET bottles.

The company focuses on sustainability, recycling over 8 billion PET bottles annually.

By embracing automation in its recycling processes, the company has improved its efficiency in recent years. Its diversified product line caters to the automotive, textiles, and home furnishing industries.

The company benefits through government policies such as approving B2B (business to business) recycling for food grade applications & mandatory regulations to use recycled PET from FY24.

It received an order in August last year from Moon Beverages, for a supply of rPET chips. Moon Beverages is an authorised bottler of Coca-Cola.

Last year, the company launched its new brand Go Rewise. Go Rewise is dedicated to conserving resources and establishing sustainability by efficiently recycling PET plastic into premium quality products.

Ganesha Ecosphere is eyeing revenues of around ₹17-19 bn for FY25. The expansion in the bottle-to-bottle capacities is expected to help it achieve a compound annual growth rate (CAGR) of around 20-22% over the next 3-4 years.

#2 Polyplex Corporation Ltd

Polyplex Corporation Ltd is one of the world’s largest manufacturers of thin polyester film. The company produces a diverse range of plastic films used in packaging, electrical, and industrial applications.

Polyplex has a global footprint with manufacturing facilities across several countries, enabling it to meet growing international demand.

The company derives 69% of its revenue from the food and non-food packaging segments and the balance 31% come from the industrial segment.

Coming to its financials, for the first quarter of FY25, Polyplex reported an 8% revenue growth with operating profit growth of more than 160%. 

Ebitda margins expanded significantly from 3.9% in Q1FY24 to 9.7% in Q1FY25.

Going forward, the company’s management has guided for continued recovery in demand for both industrial and packaging segments. The management is taking conscious efforts to expand the portfolio and improve margins even further.

Interestingly, Polyplex is also an interesting EV-related stock to keep on your radar as polyester film is one of the key products used in lithium-ion battery.

The company is expecting recovery in demand in both industrial and packaging segments, in the coming short term to medium term time frame.

#3 Uflex Ltd

The third one on the list of plastic recycling companies is Uflex.

Uflex is India’s largest flexible packaging solutions company, with a significant global presence. The company offers a wide range of packaging products across industries like food, pharmaceuticals, and personal care.

Uflex is also a leader in sustainable packaging, with a focus on recyclable and eco-friendly solutions.

In the past two years, the company has seen its margins decline because of oversupply in the industry and rise in the raw material prices.

Also, the BOPP and BOPET industries are highly cyclical. The industry tends to add large capacities when prices improve, resulting in overcapacity and, hence, pressure on realisations.

This was exactly why shares of the company were under pressure for the better part of 2024.

However, the company is showing signs of a turnaround. The massive amount it spent on capex in FY24 and on its Egypt facility and Panipat plant finally seem to be paying off.

Going forward, the company expects margins to improve as the Panipat plant starts commercializing.

Tyre recycling

Now, let’s look at the players involved in tyre recycling industry -

#1 Tinna Rubber and Infrastructure Ltd

Tinna Rubber and Infrastructure is a leading player in tyre recycling, converting waste tires into high-value products like crumb rubber and modified bitumen, which are extensively used in road construction.

The company contributes significantly to sustainable infrastructure by offering eco-friendly alternatives for road projects.

It's the largest integrated waste tyre recycler in India and among the global leaders in manufacturing recycled rubber materials. It has manufacturing facilities across India and one in Oman.

Tinna Rubber delivered a solid financial performance for the first quarter of FY25.

The company's revenue surged by 69% year-on-year, driven by strong performance across all segments. This growth was accompanied by a 40% increase in Ebitda, resulting in improved EBITDA margins of 18.2%.

The company's profitability has also witnessed substantial growth, with net profit soaring 130% YoY.

On the operational front, Tinna Rubber demonstrated strong execution with a 75% year-on-year growth in tyre recycling volumes. The company's focus on expanding its export business yielded impressive results, with a 51% YoY growth in exports.

With India’s growing focus on sustainable construction, Tinna’s innovative solutions are in high demand.

To address this growing demand, the company recently commissioned a new manufacturing unit, enhancing its capacity by 50%.

It is also venturing into recycling passenger car radial (PCR) tyres and thermo plastic elastomer (TPE). Tinna Rubber has earmarked ₹50 lakh for capital expenditure in FY25 to support its growth initiatives.

Apart from this, the company has recently acquired a tyre recycling company in Oman. It is a pilot project to recycle 6,000 tonnes of waste tyres annually. It is also exploring a joint venture in South Africa.

#2 Gravita India Ltd

Gravita India is a global leader in lead recycling, specializing in the recovery of lead from used batteries and other scrap materials.

The company also recycles aluminum and plastics, offering a wide range of eco-friendly products for industries like automotive, energy, and construction.

For the first quarter of FY25, Gravita India delivered a robust performance, driven by strong growth in lead and plastic segments and improved profitability in aluminium.

The company reported a stellar 29.1% year on year (YoY) jump in revenues followed by a 50.2% and 29.3% jump in operating profit and net profit, respectively.

The company's focus on volume growth in the lead segment, coupled with improved profitability in the aluminium business due to higher LME prices, was instrumental in driving this exceptional performance.

Looking ahead, Gravita is investing heavily in future growth avenues. The company's foray into lithium-ion battery recycling and tyre recycling is a strategic move to tap into emerging opportunities.

Additionally, the company has expansion plans for its rubber, paper and steel recycling segments.

To know more, check out Gravita’s financial factsheet.

Conclusion

Apart from the above five, there are some more companies making significant strides in the tyre and plastic recycling industry.

These include Plastiblends India, Indo Tech, GRP, among others.

As India embraces the dual challenges of economic growth and environmental sustainability, the emphasis on recycling presents significant investment opportunities.

The companies featured in the plastic and tyre recycling sectors are not just addressing the urgent need for waste management; they are strategically positioned to capitalise on the increasing demand for eco-friendly products.

It goes without saying that sustained research should not be compromised before making any investment decisions.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com