This graphite electrode stock rallied 96% in 2018 and 1455% in 2017

Shares of graphite electrode manufacturer HEG hit a new high of Rs 4,660, up 5% on the BSE in intra-day trade, after the company reported a stellar set of numbers by reporting a net profit of Rs 7.7 billion for the first quarter of financial year 2018-19 (Q1FY19). The company had posted a net loss of Rs 84 million in the same quarter year ago.

Revenue of the company during the quarter under review increased 7.4 times at Rs 15.95 billion against Rs 2.14 billion in the previous year quarter. EBIDTA (earnings before interest, tax, depreciation and amortization) margin stood at 75% compared with 11% in Q1FY18.

For FY18, the company had also posted a robust performance by reporting net profit of Rs 10.81 billion against net loss of Rs 501 million in FY17. HEG has also repaid its entire debt (long term, short term as well as working capital) and is now debt free, providing further strength to balance-sheet. The Company said it has plans to invest the cash surplus in avenues that enable it to sustain its growth momentum.

"The graphite electrode market is expected to sustain its growth momentum in the current year (2018-19) as the demand-supply gap is expected to widen – considering the growing steel manufacturing capacity based on the EAF technology and the supply constrains in the graphite electrode space. Even as demand would remain robust, growth in product realisation is expected to be mature," HEG said in an annual report.

Given China’s war on polluting industries and other factors, the company believes the current upsurge in Global graphite electrode demand to sustain its momentum over the foreseeable future as the demand -supply is widening. 

“The graphite industry globally, and in India, remains buoyant given the structural changes that have been brought about because of macroeconomic factors. Due to challenging entry barriers and being a highly capital intensive business, supply constrains are expected to continue till the foreseeable future,’’ said Ravi Jhunjhunwala, Chairman & Managing Director, HEG.

The stock has seen a strong rally on the bourses by surging 96% thus far in the calendar year 2018 (CY18) from Rs 2332 on December 29, 2017. On comparison, the S&P BSE Sensex was up 10% so far in year. In CY17, the stock zoomed 1,455% from Rs 150 against 28% rise in the benchmark index.