HEG surges 10%, nears 52-week high ahead of March quarter results

HEG is scheduled to announce its March quarter results on Thursday, May 27, 2021

Shares of HEG edged higher by 10 per cent to Rs 2,398.65 on the BSE in intra-day trade on Monday ahead of the January-March quarter (Q4FY21) results later this week. The stock of graphite electrodes manufacturer was hovering close to its 52-week high levels of Rs 2,564 touched on April 9, 2021, in intra-day trade.

At 02:42 pm, the stock was up 9.8 per cent at Rs 2,393 as compared to a 0.44 per cent gain in the S&P BSE Sensex. The trading volumes on the counter jumped over three-fold with a combined 1.1 million equity shares having changed hands on the NSE and BSE at the time of writing this report.

HEG board of directors is scheduled to meet on Thursday, May 27, 2021, to consider the audited financial results of the company for the quarter and fiscal year ended March 31, 2021. The board will also consider and recommend the payment of dividend, if any, for the financial year 2020-21.

HEG Limited is a leading graphite electrode manufacturer and exporter globally. It is among the world’s top five graphite electrode manufacturers. The company exports approximately 70 per cent of its production to about 30 countries around the world.

For the October-December quarter (Q3FY21), HEG had posted a standalone profit after tax (PAT) of Rs 5 crore as against a loss of Rs 34 crore in the September quarter (Q2FY21), led by strong operational performance. The company’s revenue from operations remained flat at Rs 320 crore against Rs 323 crore in the previous quarter. Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin stood at 8 per cent compared with a negative of 8 per cent in the preceding quarter.

“The excess inventories of graphite electrodes have been liquidated and now steel companies are working at normal inventory levels. The increase in steel production and normalisation of electrode inventory levels have resulted in an increase in electrodes demand thus increasing our capacity utilisation levels. We expect electrode prices to start firming up from next quarter,” HEG had said in investor presentation following the announcement of its December quarter results.

The uptick in steel production has also led to a pick-up in graphite electrodes demand. Going forward, the steel industry production growth trend is likely to continue with a healthy recovery in major steel-consuming industries like construction and automobiles.

“The domestic steel industry is also poised to grow with the announcement of increased government spending on infrastructure. The combination of these factors are expected to drive demand for graphite electrodes and would also have a positive rub-off on graphite electrode prices. Graphite electrode prices have already started to move northwards auguring well for graphite electrode companies," ICICI Securities said in a recent report.