HEG surges 9% on robust Q4 results

Shares of HEG have moved higher by 9% to Rs 3,198 per share, extending their past three days 5% gain on the BSE, after the company reported net profit of Rs 6.34 billion in March quarter (Q4FY18), on back of strong operational income. It had posted net loss of Rs 34 million in year ago quarter.

The company engaged in graphite electrodes business has seen its operational revenues grow nearly five-fold at Rs 12.92 billion in Q4FY18 as against Rs 2.67 billion in Q4FY17.

HEG posted consolidated net profit of Rs 10.99 billion for entire financial year 2017-18 against net loss of Rs 440 million in previous fiscal.

The board of directors have recommended a final dividend on equity shares at the rate of Rs 50 per share, for the financial year 2017-18.

The rating agency India Ratings & Research (Ind-Ra) expects HEG to maintain a liquid balance sheet and have a low reliance on external debt and, thus, the credit metrics to remain commensurate with the rating level. However, any unrelated diversification or leveraged inorganic growth would be key rating monitorables.

HEG’s average fund-based working capital limit utilisation was about 65% for the 12 months ended March 2018. Ind-Ra estimates HEG to generate strong free cash flow over FY18-FY19 to continue supporting the liquidity.

“Global demand-supply dynamics continue to remain favourable for graphite electrode players, as capacity closures have reduced the overall ultra-high powered graphite electrode capacity to 717,000 tonnes per annum. Ind-Ra expects robust graphite electrode demand to sustain, as the environmentally superior EAF route steel production’s share would gradually improve, in addition to overall steel demand growth,” Ind-Ra said in recent note.

At 10:43 am; the stock was trading 8.5% higher at Rs 3,188 on the BSE, as compared to 0.06% rise in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 927,222 shares changed hands on the BSE and NSE so far.