Eco Recycling Gets DRChoksey's 'Buy' Initiation, Sees Upto 16% Potential Upside — Check Target Price

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Deven Choksey Report

Eco Recycling Ltd. has demonstrated significant growth over the past few years, driven by rising demand for sustainable recycling solutions and strategic investments in expanding its recycling capacity.

Revenues have grown from Rs 177 million in FY23 to Rs 440 in FY25, reflecting an impressive CAGR of 57.4%. This growth is expected to continue, supported by the company’s recent capacity expansion of 18,000 mtpa, funded through internal accruals, along with further plans to scale operations.

The company’s Ebitda margins have improved significantly, rising from 22.1% in FY23 to 70.5% in FY25, driven by operational efficiencies, economies of scale, and successful cost-cutting measures, including negotiating favorable supplier terms.

These robust margins, combined with the company's growing recycling capacity, position Eco Recycling for sustained profitability. While we project a strong revenue CAGR of 30.8% over FY25-FY27E, supported by increased utilization of expanded capacity and favorable regulatory developments—such as the amendments to the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2024, however, Ebitda margins are expected to stabilize around 68%.

With installed capacity rising from 7,200 mtpa to 31,200 mtpa (4.3x) and strong traction in monetizing EPR credits, the company is well-positioned to scale volumes and improve realizations.

Strategic collaborations such as with C-MET for battery element recovery and TERRA membership enhance credibility and diversify growth avenues. A low-leverage balance sheet, internal accrual-led expansion, and improving reverse logistics further bolster operating leverage and margin visibility.

Furthermore, we forecast a revenue/ Ebitda/PAT CAGR of 30.8%/28.8%/26.9% over FY25-FY27E.

We value Eco Recycling Ltd at a PE multiple of 37.0x FY27E EPS of Rs 19.5 and arrive at a target price of Rs 720 per share, implying an upside potential of 16.1% from the CMP.

Accordingly, we have a “Buy” rating on the stock.

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