The stock of the graphite electrode maker was trading at its lowest level since August 22, 2017. In the past five weeks, it has tanked 25 per cent after reporting a consolidated net loss of Rs 353 crore in the December quarter (Q3FY20), due to steep fall in electrode prices. This was Graphite India's first quarterly loss in more than a decade. Earlier, in June 1997 quarter, it had posted net loss of Rs 2 lakh.
The lower volumes and realization has impacted the sales and margins as compared to same period last year. In addition, EBITDA (earnings before interest, tax, depreciation, and amortisation) was impacted due to fair value adjustment of inventory amounting Rs 490 crore in Q3FY20. The management said that during the quarter, the company’s performance was significantly impacted due to lower volumes and realizations.
With the global and domestic steel market turning tough, and the resulting fall in demand for electrodes, Graphite’s Q3FY20 production declined by 6,400 tons to 10,800 tons; capacity utilisation slipped to 54 per cent. Also, over-capacities in the industry led to tightly squeezed realisations for all. Graphite India’s realisation slipped to $7,594 a tonne, $4,886 lower than a year ago.
According to analysts at Anand Rathi Share and Stock Brokers, against the backdrop of the steel-demand slowdown globally, volume pressure would continue. A pick-up in realisations looks far-fetched. Despite valuations appearing attractive, no turnaround in the near future can be expected, the brokerage firm said in company update report.
Thus far in the financial year 2019-20 (FY20), the Graphite India's stock price has tanked 46 per cent against 3 per cent rise in the S&P BSE Sensex.