HEG Ltd
#HEG
Ltd or Hindustan Electro Graphite Ltd is #manufactures and supplies #electro_graphite,
globally to steel manufacturers. It is one of the leading graphite electrode
manufacturers in India. The company’s manufacturing plant at Mandideep in #Madhya_Pradesh
is the largest graphite electrode manufacturing plant in the world, with an
annual production capacity of 80, 000 MT.
Around 80% of the production is exported to 30 countries across the
globe.
HEG Ltd #Financial_Analysis
Looking
at the sales data of last 5 years it is known that the company had grown
steadily at 11% annually; though, the figures continuously dipped from
2014-2017.
One
of the major reasons for the company’s sales decline from 2014-2017 had been the
#crude_oil prices. HEG Ltd relies on crude oil companies for the raw materials
required for producing graphite electrodes. From 2014-17, crude prices shot up,
thereby, making the procurement of raw material costlier for the company.
Despite
all the #downfalls, in the #FY 2017-2018, the company registered tremendous
growth in terms of #profit, #sales, #gross_sales, #assets, #book_value, etc;
however, this trend was common with graphite manufacturers all over the globe.
There was a surge in electrode prices from 2017-2018 thereby boosting profits
and also bringing up some new players in the industry.
Another
reasons for this growth has been the increase in demand from China, which is by
far the largest consumer of graphite electrode.
It
is to be noted that graphite electrode is used in the production of steel
through the EAF (Electric Arc Furnace) route.
In
2017 many #Chinese steel and graphite electrode manufacturing plants were shut
down on the grounds of pollution. They were producing steel through blast
furnace process which does not complied with the changed environmental
regulations. This in turn increased the demand for those Chinese facilities
that were already using EAF route. This naturally increased the imports of
graphite electrode to China from India and other countries, thereby giving a
boost to HEG Ltd sales.
Total income of HEG Ltd in Mar’16 was only 831.71
crores which rose by a small margin to Rs 867.17 crore in Mar’17. But in
Mar’18, the company registered a steep rise in its total income to Rs 2762.42
Cr, rising further to Rs 6702.02 Cr in Mar’2019. However, in Mar’20 the total
income has come down to Rs 2292.78 Cr due to decline in electrode prices and
other factors. Total company expenses have been the all time highest at Rs
2154.85 Cr in the last one year.
In
the financial year 2016-17 the company registered a net loss of 50.5 Cr as
compared to a net profit of 2672.06 Cr in FY 2017-18.
It
must be told that the net sale of the company has declined from 816.51 Cr in
June’19 to 233.29 Cr in June’20 that is a 75% drop in sales. The decline is
possibly due to drop in global graphite prices and present escalation of some
Indo-China border disputes and trade sanctions.
Indian Graphite Industry and China
China
is the world’s largest producer of steel, producing around 1000 MT of steel annually.
The two major Indian graphite electrodes catering to the Chinese steel industry
are Graphite India Ltd (GIL) and HEG India Ltd.
Favorable
Chinese policies in recent past have propelled the share prices of these two
Indian bigwigs to a new high. In the FY 2017-18, HEG Ltd share prices surged by
a whopping 1524% while GIL was trailing behind at 821%.
However,
China itself was the largest producer as well as consumer of graphite electrode
in 2017. But when the Chinese government shut down several steel and graphite
manufacturers using blast furnace method in 2017 citing environmental concerns,
it suddenly boosted Indian graphite electrode export to China.
Currently,
HEG Ltd is selling graphite electrode to China at a price of $15, 000/ ton.
But, the big question is will it be able to make the prices raise further or is
it going to decline with time.
Chinese
steel and graphite electrode facilities those have been closed in 2017 are now
back on the foot and are in the process of complying with the environmental
regulations. Once that happens, it would be difficult for HEG Ltd to see
profits as it had witnessed in the past. Moreover, the prices of Needle coke, a
raw material used in graphite electrode manufacturing is also predicted to go
up, further reducing the profit margin.
The
good news is that HEG Ltd is still selling graphite electrodes to China at a
price close to $15000 and this is expected to rise further until China imports
more GE than it exports.
Another
point for HEG Ltd to cheer up is that Chinese plants manufacture low quality HP
Grade electrodes as compared to HEG’s high quality UHP grade.
#Technical_Analysis
In
Day candle view stock is looking at bottom, #indicators are also at bottom but
seeing the charts from April 2020 to Sept 2020 stock is stable & showing
the possibilities to get a #high jump from here.
Now
coming into #Monthly #candlestick view at the bottom stock has made a #tweezer_bottom
& after that is stable from last 6 months even during lockdown as well
stock did not fall. Indicators are also looking at the support which is indicating
a bull during upcoming months.
Conclusion:
Recommended by Investment Advisor Mr. Vinay Prakash from Investing Daddy
Investment Adviser Varanasi it is recommended that
TARGET
FOR HEG BY MARCH 2021 IS 1400-1450, IF ONE IS INCLUDING INTO PORTFOLIO SHOULD
KEEP WITH SL OF 370-380
*Kindly
have advise from expert for portfolio balancing before including stock in your
portfolio.
*Investment
in securities market is subject to market risk.
*
Mr. Vinay Prakash Tiwari is a SEBI Registered investment Advisor
Investing Daddy
+9107415511526
+919628519650
Blog: https://investingdaddy.blogspot.com/2018/07/investing-daddy-investment-adviser-to.html
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