Which Recycling Stocks Are Deep Value Picks in Week of May 2, 2026?

Sector Pulse

The Recycling sector, represented by Jain Resource Recycling Ltd (JAINREC), is currently experiencing an expanding demand environment. JAINREC delivered a beat in 9M FY26, exceeding its historical revenue growth guidance of 20-25% by achieving 38% year-on-year growth to reach INR 6,438 crores. Profitability also saw an increase, with PAT growing 65% year-on-year to INR 281 crores and EBITDA climbing 65% to INR 449 crores. This performance was underpinned by a 29.34% increase in volumes and a 116 basis points improvement in EBITDA margins to 7%.

Catalysts Playing Out Across the Pack

Several key catalysts are actively driving the sector's growth trajectory. The most prominent is the Value Added Product Mix Shift. JAINREC is transitioning towards higher-margin products, which is expected to add 1% to overall margins and push EBITDA per ton to INR 70,000-75,000. As management noted, "once our plant start for the value-added product... it's almost goes to INR70-INR75." Additionally, Operating Leverage Inflection is highly visible, with JAINREC's 65% EBITDA growth translating into a 116 basis points margin gain. We are also seeing the impact of Order Book Or Contract Wins, as JAINREC secured a tender that brought in a large quantity of copper. Finally, Mandatory Industry Norms like Extended Producer Responsibility (EPR) are shaping raw material sourcing, with JAINREC currently sourcing 44% of its materials domestically.

What Managements Are Guiding

Management tone across the sector is decidedly CONFIDENT. JAINREC has raised its forward revenue growth guidance from 20% to a 40%-50% range. Management stated, "we have projected only 20% growth in our last presentation... we are going to maintain the historical growth of 40%-50%." On the margin front, EBITDA per ton for copper is expected to stabilize or rise as value-added products are introduced. To support this growth, JAINREC has outlined a targeted capex of INR 110 crores.

Shared Risks (9-type taxonomy)

Despite the growth, the sector faces several risks. Under the commodity risk taxonomy, sudden copper price spikes have temporarily impacted EBITDA per ton due to purchase formula lags. Management acknowledged this, stating, "because of this price rise and the steep price rise in copper for the last quarter, this has got reduced to some extent." However, hedging practices are in place to protect gross margins. logistics risks are also present, with JAINREC's working capital cycle expanding to 82 days due to New Year holidays disrupting collections. On the geopolitical front, US tariff bills on copper and aluminum were flagged, but JAINREC mitigated this concern by clarifying, "we don't export to USA, we only buy from USA, that's why the whole US tariff game doesn't impact us at all." Finally, a litigation risk involves a SEBI investigation against the promoter with a penalty of INR 25 lakhs, which is currently under appeal.

Bottom Line

The Recycling sector is demonstrating operational momentum, driven by a 29.34% volume growth, operating leverage, and a shift towards value-added products. JAINREC's guidance upgrade to 40%-50% revenue growth and margin execution outweigh the transient commodity and logistics risks. Consequently, the outlook remains positive as the company capitalizes on domestic regulatory tailwinds and its expanding product portfolio.