HEG stock gains in early trade as firm reports 680% rise in Q2 net profit

HEG stock gains in early trade as firm reports 680% rise in Q2 net profit

The profits were higher as fresh steel making capacities based on the electric arc furnace (EAF) route came on-stream globally and domestic steel makers pushed up production in under used plants, HEG said.

The HEG stock rose in early trade after the graphite electrode maker reported a 680 percent rise in net profit for the quarter ended September 30, 2018.  The profits were higher as fresh steel making capacities based on the electric arc furnace (EAF) route came on-stream globally and domestic steel makers pushed up production in under used plants, HEG said.

The stock rose up to 6.56% or 280 points to 4544 level on the BSE.  At 11:52 am, the stock was trading 4.85% or 206 points higher at 4,470.95 on the BSE.

The stock has been gaining for the last two days and has risen 5.24% during the period.

It opened with a gain of 5.06% in trade today. The stock has risen 161% during the last one year and gained 91.57% since the beginning of this year.

HEG reported a profit after tax (PAT) of Rs 889 crore during July-September quarter compared to Rs 114 crore profit after tax during the same quarter a year ago, HEG Ltd, part LNJ Bhilwara Group.

Its revenue rose 338% to Rs 1,794 crore in September quarter compared to Rs 410 crore in the corresponding quarter in the year ago period. Q2 earnings before interest, tax, depreciation and amortisation stood at Rs 1,389 crore compared with Rs 192 crore in the corresponding quarter in the year ago period.

Graphite electrodes are used to melt scrap in electric arc furnaces to produce new steel.

Ravi Jhunjhunwala, Chairman & Managing Director, HEG Ltd said, "We continue to experience robust demand for electrodes on the back of strong growth in global EAF steel sector. In addition, the domestic steel industry expanded by 6.1 per cent in the first nine months of the year. Moreover, the ongoing consolidation in Indian steel capacity and higher production from under-utilised steel assets is also fuelling fresh demand for electrodes".

HEG Chief Financial Officer (CFO) Raju Rastogi said the Indian steel industry, which is undergoing consolidation, will further boost demand for electrodes in the medium-term. The company's plant located at Mandideep near Bhopal in Madhya Pradesh is the largest single-site integrated graphite electrode facility in the world, it said.

Brokerage Macquarie raised target price for the stock to Rs 5,823 from Rs 5,124. Q2 earnings before interest, tax, depreciation and amortisation came 10% above estimates led by higher realisation. It said higher needle coke costs may have marginal impact on margin in second half of year. The brokerage upgraded its earnings per share estimate by 11-12% for FY19-20.