HEG soars 13% on strong Q2 results; Graphite India rallies 9%

Shares of graphite electrode manufacture were in focus, with HEG ralling as much as 13 per cent to Rs 2,316.65 on the BSE in Tuesday’s intra-day trade after the company reported a consolidated net profit of Rs 131.52 crore for September quarter (Q2FY22), on healthy revenue growth. It had posted a consolidated net loss of Rs 15.36 crore in Q2FY21 and a profit of Rs 56.77 crore in Q1FY22.

The company’s revenue from operations grew 60 per cent year on year (YoY) to Rs 517.56 crore from Rs 322.88 crore in the corresponding quarter of previous fiscal. It posted earnings before interest, tax, depreciation and amortization (Ebitda) of Rs 167.28 crore against loss of Rs 25.46 crore in a year ago quarter.

HEG said the company had undertaken an expansion project in past to increase the existing capacity from 80,000 tons to 100,000 tons and the same is going on in full swing. There was a few months delay due to Covid and the management expects the expansion project to be completed in the October-December 2022 quarter and the company will be ready with commercial production from early 2023.

Meanwhile, shares of Graphite India also surged 9 per cent to Rs 567.70 on the BSE in intra-day trade today. Graphite India is the largest Indian producer of graphite electrodes by total capacity. Its manufacturing capacity of 98000 tonnes per annum is spread over three plants at Durgapur & Nashik in India & Nuremberg in Germany.

For the quarter, Graphite India reported consolidated capacity utilisation of 81 per cent compared to 60 per cent in Q2FY21 and 75 per cent in Q1FY22. Consolidated topline for the quarter was at Rs 692 crore, up 43 per cent YoY and 13 per cent QoQ. Consolidated EBITDA was at Rs 109 crore, down 23 per cent QoQ. Consolidated Ebitda margin came in at 15.8 per cent compared to 23.1 per cent in Q1FY22. The company’s consolidated net profit during the quarter was down 15 per cent QoQ at Rs 128 crore.

Graphite India had said the YoY sales growth was primarily driven by both higher volumes and realizations whereas the QoQ sales growth was characterized by improved realizations along with a modest increase in volumes. However, with increase in the prices of graphite electrode, we saw a similar increase in prices of needle coke.

The management said with decline in steel production and exports from China, we may see a gradual increase in steel production from the electric arc furnace (EAF) steel producing nations which shall drive both electrode demand and realizations. “Graphite India is well positioned to meet the growing demand from the domestic industry and from the EAF steel producing nations in the light of China’s reducing exports. The ongoing shortage of containers and increasing logistics costs may put some pressure however, we remain confident to maintain high operational efficiency at our plants and deliver profitable growth in the coming quarters,” the management said.