Graphite India, HEG zooms over 100% in three months on growth prospects

HEG locked in upper circuit of 10% at Rs 744, also its new high, while Graphite India surged 8% to Rs 275 on BSE in intra-day trade

Shares of companies engaged in graphite electrode business such as Graphite India and HEG continued their upward movement gaining upto 10% on BSE in otherwise range-bound market.

HEG was locked in upper circuit of 10% at Rs 744, also its new high on BSE. According to report the analyst at foreign brokerage house Jefferies initiated coverage of  the company with a recommendation of buy with a target price of Rs 1,050 in one year.

Graphite India surged 8% to Rs 275 on BSE in intra-day trade on back of nearly three-fold jump in trading volumes. A combined 4.16 million shares changed hands on the counter on NSE and BSE till 2:21 PM. The stock is trading close to its record high of Rs 276 touched in August 21, 2017 in intra-day trade.

In past three months, HEG has zoomed 193%, while Graphite India soared 122% as compared to 3% rise in the S&P BSE Sensex.

The strong performance is being driven by a significant change in the outlook for the global graphite electrode segment in the last few months, which has brightened the prospects of the sector.

According to HEG, recent Industry consolidation in graphite electrode industry is to improve capacity utilization, going forward.

“Electrode sale prices expected to increase with the enhanced capacity utilization levels in the industry. Electrode market likely to stabilize at higher utilization levels during FY 18 vis a vis FY 17,” HEG said in investor presentation.

“The fortunes of the graphite electrode sector have been on an uptrend. Over the last few months, spot graphite electrode prices have registered a notable increase. Going forward, HEG is likely to benefit from increased prices from H2FY18 and FY19E,” analysts at ICICI Securities said in company update.

Going forward, the increased volume and improved pricing is likely to boost the company’s earnings. A higher operating leverage will accentuate the operating margins sharply from current levels. We expect EBITDA (earnings before interest, tax, depreciation and amortization) margins to increase from 9.4% in FY17 to 17.8% in FY18E and further to 18.3% in FY19E, added report.

COMPANY	LATEST	PREV CLOSE	GAIN(%)	14/06/2017	% chg
HEG	743.95	676.35	9.99	254.00	193
GRAPHITE INDIA	269.80	253.80	6.30	121.65	122
Latest price on BSE in Rs at 02:21 PM