Graphite electrodes shares rally; Graphite India zooms 62% in three weeks

Graphite India zooms 62%, while HEG surged 50% in past three weeks, against 0.3% rise in Sensex

Shares of companies engaged in graphite electrode business such as Graphite India and HEG have rallied by up to 16% on BSE in intra-day trade on back of heavy volumes.

Graphite India surged 16% to Rs 190, also its record high on BSE, on back of two-fold jump in trading heavy volumes. A combined 3.61 million equity shares representing 9% of total equity of the company have changed hands on the counter on BSE and NSE till 02:26 pm.

Since June 12, the stock rallied 62% from Rs 117, as compared to a marginal 0.30% rise in the S&P BSE Sensex.

The company had posted a more-than-doubled net profit at Rs 62 crore in March quarter (Q4FY17) against Rs 28.6 crore in Q4FY16.

“Since the start of this financial year the industry dynamics has changed with realizations firming up. We expect the benefit of improved pricing to reflect in our financial performance going forward,” said K K Bangur, Chairman, Graphite India, while announcing Q4 results.

HEG, too, hit fresh 52-week high of Rs 391, up 6% on BSE, rallied 50% in past three weeks.

HEG on Friday, June 30, 2017, said that India Ratings & Research (Ind-Ra) affirmed the credit rating of the company as IND A' with stable outlook.

“With the tightness on the supply side, given the change in the industry structure and demand remaining healthy, the demand supply balance has shifted in the favour of the suppliers. This has resulted in a significant increase in graphite electrode prices to nearly USD 4,000/t from USD 2,000/t in the spot market,” Ind-Ra said in a press release.

However, most players have not been able to take the full benefit of the price increase, given that the graphite electrode industry contracts for 60%­70% of the capacity at the beginning of a calendar year. The benefit of the increased prices will largely be realised in 2HFY18, given that capacities in these quarters would have been contracted at higher prices.

The industry might also look at fresh capex, as capacity utilisations reach 80%­85% in FY19. HEG could also look at fresh capex in FY19 at the existing plant location to increase the capacity to nearly 100,000 tpa (FY17: 80,000tpa). This though remains contingent on the company achieving higher capacity utilisation rate, the same if done, would result in a higher leverage ratio, it added.