The shares of the leading manufacturer of graphite electrodes gained up to 6 percent after the company announced the acquisition of an 8.23 percent stake in GrafTech International.
With a market capitalization of Rs 9,007.61 crore, the shares of HEG LTD. were trading at Rs 2,333.85 per share, increasing around 5 percent as compared to the previous closing price of Rs 2,226.25 apiece.
Reason for Rise:-
Today the shares of the company have seen a bullish movement after HEG LTD announced the acquisition of an 8.23 percent stake in GrafTech International, an NYSE-listed company. The transaction value of this acquisition of Rs 248.62 crore.
Moreover, GrafTech International Ltd. is a major manufacturer of high-quality graphite electrodes used in the manufacturing of electric arc furnace steel and other ferrous and nonferrous metals. It boasts a competitive portfolio of low-cost, ultra-high-power graphite electrode production facilities, including some of the world’s largest.
Financial condition:-
Analyzing the company’s financial performance, revenue shrunk by 15 percent from Rs 671 crore in Q1FY24 to Rs 571 crore in Q1FY25 but during the same time, net profit plummeted by 83 percent from Rs 139 crore to Rs 23 crore.
Market overview:-
Global steel production saw regional variations: the U.S. (-2.4%), Japan (-2.7%), South Korea (-6.8%), and Russia (-3.1%) all declined, while India grew 6.9% to 74 million tons due to strong domestic demand. China’s production fell 1.1%, but exports surged to 53.4 million tons in H1 2024.
Capacity expansion:-
HEG has completed its expansion from 80,000 to 100,000 tons, making its plant the largest single-location facility in the Western world. Despite challenging market conditions, the company expects to maintain a capacity utilization of around 75% for FY25.
Investment & projects:-
HEG has invested around ₹60 crores in its green anode plant, mainly for land and preoperative expenses. The commissioning has been delayed by 1-2 quarters due to falling lithium-ion battery prices and ongoing power pricing negotiations. Power accounts for 30-35% of the variable costs, and management is actively seeking ways to reduce these costs.
HEG’s investment in GrafTech is strategic, given GrafTech’s backward integration in the graphite supply chain. Despite concerns over GrafTech’s potential delisting due to stock price challenges,
HEG’s management remains confident in the long-term value of this investment, focusing on its strategic benefits in the graphite market.
Malana Power reported profitability of ₹350 crores for FY24, with HEG Greentech set to hold a 51% stake post-restructuring. However, plans for a pumped hydro project in Himachal Pradesh have encountered regulatory delays, slowing down potential development opportunities in this area.
Management guidance:-
Management expects near-term margin pressures but remains optimistic about demand recovery starting in 2025. The company is well-positioned to benefit from rising demand for electrodes and anodes, thanks to significant investments in capacity and technology. However, pricing pressures from Chinese exports continue to challenge profitability.
Company profile:-
HEG Limited manufactures and exports graphite electrodes. The company’s segments are graphite electrodes (including other carbon products) and power. Graphite electrodes are used in steelmaking using the Electric Arc Furnace (EAF) technique, which requires around 1.5-2.0 kg of graphite electrode.
Written by:- Abhishek Singh
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