China impact? HEG stock nears 5-year high, zooms 30% in 2 days

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Shares of HEG hit an over four-year high of Rs 569, surging 14 per cent on the BSE in Wednesday’s intra-day trade amid heavy volumes. In the past two days, the stock of the graphite electrodes (GE) manufacturer has zoomed 30 per cent on healthy outlook. It was trading at its highest level since January 2019. It had hit a record high of Rs 990 on October 16, 2018.

 

As per media sources, China has announced that it will implement stricter end-user and end-use reviews for graphite exports to the US.

 

According to a Bloomberg report, China announced an outright ban on several materials crucial to chip-making from being exported to the US citing concerns over military usage, in a tit-for-tat move after President Joe Biden’s government escalated technology curbs on Beijing. CLICK HERE FOR FULL REPORT

 

HEG has been world’s largest single site graphite electrode plant under one roof with a capacity of 80,000 tons pa for a long time. The company recently completed expansion to 100,000 tons to become the third largest producer of Graphite electrodes in the western world. It is  exporting approx. 65 – 70 per cent of its production to about 35 countries around the world consistently  since more than 20 years.

 

HEG expected initiatives for steel industry decarbonization are set to increase demand for graphite electrodes, driven by the adoption of  Electric Arc Furnaces (EAF) steelmaking , resulting in additional demand of 200,000 tons approx. by 2030 (excl China). However, considering the irreversible process of decarbonization, we are optimistic about the growth of GE demand in the medium to long run.

 

According to ICICI Securities, China’s move is response to geopolitical tensions between China and the US with new US elect president vehemently articulating imposing tariffs on Chinese good entering US territory. If this move were to be implemented, it is expected to limit the availability of graphite in US, creating favourable opportunity for domestic graphite electrode manufacturers like HEG and Graphite. 

 

HEG, in particular, stands to benefit as exports account for over ~70 per cent of its revenue, with the US being a key market within this segment (contributes ~17 per cent of sales). Additionally, the government has proposed a Rs 9,000 crore production linked incentive (PLI) scheme for electric battery components, marks a promising development for HEG given its intent to venture into the production of graphite anode, which is a crucial component for lithium-ion batteries, the brokerage firm said.

 

At 11:06 am; HEG was trading 13 per cent higher at Rs 566, as compared to 0.37 per cent rise in the BSE Sensex. The average trading volumes on the counter jumped over five-fold, with a combined 17.99 million equity shares changing hands on the NSE and BSE.

 

On October 18, 2024, HEG sub-divided/split the face value of company’s equity share of Rs 10  each into 5 equity shares of face value of Rs 2. The company had said the rationale behind stock split with a view to enhance the liquidity of company's equity shares and to encourage participation of retail investors by making equity shares of the Company more affordable.

 

Meanwhile, shares of Graphite India rallied 7 per cent to Rs 612.50 on the BSE in intra-day trade today. In the past two days, it has surged 17 per cent. The stock had hit a 52-week high of Rs 709.45 on April 25, 2024.