Comparative Analysis of HEG & Graphite India.......

Dear Blog Readers,

Recently two stocks are in focus of every investors in market. So i did some comparative analysis and  detail research of current scenario of Graphite industries.

	HEG ( cmp 1904)				GRAPHITE INDIA ( cmp 589)
Business	The main business of HEG is graphite which accounts for 80% of the revenue. The principal raw materials used in the manufacture of electrodes are Needle coke and pitch. Apart from Graphite Electrodes, other main products are – 1) Activated Carbon Fabric (ACF) 2) Carbon Blocks  3) Graphite Specialities				Graphite India Limited (GIL) is the pioneer in India for manufacture of Graphite Electrodes as well as  Carbon and graphite Speciality products. Apart from Graphite Electrodes, other main products are – 1)     Speciality Carbon and Graphite                         2)     Impervious Graphite Equipment 3)     Calcined Petroleum Coke & Carbon Electrode Paste 4)     Glass Reinforced Plastic Pipes 5)     High Speed Steel & Alloy Tool Steels
Promoter	Bhilwara Group				Having started in 1967 in collaboration with erstwhile Great Lakes Carbon Corporation (GLCC) of USA
Capacity	Capacity : 80,000 MT per annum				Capacity  : 18000 tons per annum.   Thus the total group capacity is nearly 98,000 tons per annum
Plant	Madhya Pradesh				GIL’s manufacturing facilities are spread across 6 plants in India with an aggregate electrode manufacturing capacity of 80000 tons per annum. Plants at Satpur, Durgapur, Bangalore, Nasik
Market Cap	7607.02				11,487 Cr
BV	238.38				95.08
FV	10				2
52 WK High/Low	2091.75/144.10				633.95/70.65
Annual Result	FY17	FY16	FY15	FY14	FY17	FY16	FY15	FY14
	-50.1 Cr	-15.15 Cr	39.0 Cr	86.62 Cr	112.28 Cr	82.38 Cr	82.19 Cr	170.92 Cr
ROE	-5.75%				6.06%
Debt/Equity	0.78				0.07
Assets	1828.66 Cr				2418 Cr
Promoter Holding	61.04 %				65.22 %

Key Takeaways from Comparison :- 

• Graphite India is winning the battle if comparing with HEG.

• Graphite is Profit making company while HEG making loss from last two years. Might see some turnaround result in FY18 in HEG.

• Both company reducing debt constantly. But if we can see Graphite India has Lower debt compared to HEG.

• By comparing Graphite India has more Assets.

• Also Graphite India Market cap is more.

• Grapite India has 4 plants at various locations while HEG has 1 plant at Madhya Pradesh. So obviously Graphite Indiahas more Production capacity.

Why both stocks run up so fast in last 3 months ?

• Graphite electrode manufacturers are the key beneficiary of the improvement in its end market - global steel demand.

• Lower supply and higher demand to entry is also positive news.

• One of the main reason behind recent rally in graphite electrode has been on the back of news flow that there has been a clamp-down in the graphite electrode manufacturing capacity in China on account of stringent pollution norms.

• China is on its way to cut graphite electrode capacity by around 50 percent.

• About 8-9 percent incremental increase in demand for graphite electrode is possible due to developments in China.

• With the tightness on the supply side, given the change in the industry structure and demand remaining healthy, the demand supply balance has shifted in the favour of the suppliers. This has resulted in a significant increase in graphite electrode prices to nearly USD 4,000/t from USD 2,000/t in the spot market.

Is there any steam left in stocks ?

• I think steam is left in both the stocks.
• HEG might also look at fresh capex, as capacity utilisations reach 80%­-85% in FY19.

• HEG could also look at fresh capex in FY19 at the existing plant location to increase the capacity to nearly 100,000 tpa (FY17: 80,000 tpa).

• HEG might give turnaround result in FY18, Also there might 2-3 fold jump in FY18 result of Graphite India.

• Graphite India had posted a more-than-6 times (600%) net profit at Rs 16 crore in September quarter (Q2FY17) against Rs 90 crore in Q2FY18.

• HEG had posted a more-than-8 times (800%) net profit at Rs 13 crore Loss in September quarter (Q2FY17) against Rs 113 crore Profit in Q2FY18.

My View : -

• By comparing both stocks, both are buy on dips.

• HEG can give turnaround result and Capex there which will benefit sure.

• Graphite is profit making company, fundamentally strong and also can give good result.

• One can see 20-30% upside from here in both shares in short term.

• My choice is Graphite India fro target of 900, 1000 in long term.

Happy Investing

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This is a personal blog and presents entirely personal views on stock market for only education purpose. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible. 

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NOTE : THE ABOVE IS NOT A RESEARCH REPORT NOR A RECOMMENDATION  BUT INFORMATION AS AVAILABLE ON PUBLIC DOMAIN. 

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