Small cap stock falls up to 6.5% after company posts 14% dip in standalone net profit in Q4

Shares of HEG Limited opened its trading hour at Rs 1,190.20 and currently trades at Rs 1,182, slipping nearly 6.5 percent as compared to the previous closing price of Rs 1,260.90. The company has a market capitalization of Rs 4,556 crores. 

Yesterday, the company announced financial results for Q4 as well as for FY22-23. Details of the same are discussed later on in the report. Moreover, the company’s Board also recommended a Final dividend of Rs 42.50 per share ( 425 percent of its Face Value of Rs 10 per share) for the same financial year. 

HEG Limited is a graphite electrode manufacturer operating in business segments including Graphite Electrodes and Power Generation. Some of its geographical segments include India, the United States, Turkey, Egypt, etc. 

Looking at the consolidated financials, the company, on a QoQ basis, has shown movements in opposing directions as far as the operating revenues and net profits are concerned. The operating revenues moved up from Rs 530 crores in Q3 to Rs 617 crores in Q4 and net profits, on the other hand, shifted down from Rs 105 crores to Rs 100 crores. 

Having a yearly comparison of the above-mentioned metrics, the operating revenues as well as net profits increased with the former shifting from Rs 2,202 crores during FY21-22 to Rs 2,467 crores in FY22-23 and the latter moving from Rs 431 crores to Rs 532 crores showing an increase of around 23 percent. 

On a standalone basis, the company’s sequential net profits reduced from Rs 103 crores to Rs 89 crores indicating a 14 percent decrease. 

The profitability parameters of the company have bounced back in recent financial years with the basic ones such as the return on equity (ROE) transitioning from negative returns of 0.51 percent in FY20-21 to positive returns of 11.64 percent in FY21-22. 

Likewise, the return on capital employed (ROCE) shifted from negative returns of 0.3 percent to positive returns of 13.57 percent during the same time horizon. 

According to the latest shareholding data available for the March 2023 quarter, promoters hold a 55.78 percent stake, and Foreign Institutional Investors (FIIs) hold a 6.25 percent stake in the company. 

Written by Amit Madnani

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