GuruFocus -
- Revenue: INR 568 crores for Q2 FY25, down from INR 614 crores in the same quarter of the previous year.
- EBITDA: INR 140 crores for Q2 FY25, up from INR 130 crores in the corresponding quarter of the previous year.
- Net Profit After Tax (Standalone): INR 62 crores for Q2 FY25, similar to INR 60 crores in the same quarter of the previous year.
- Net Profit After Tax (Consolidated): INR 82 crores for Q2 FY25, down from INR 96 crores in the corresponding quarter of the previous year.
- Capacity Utilization: 80% for Q2 FY25, the highest among global producers.
- Treasury Size: Nearly INR 923 crores as of September 30, 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HEG (NS:HEGL) Ltd (BOM:509631) has successfully expanded its capacity from 80,000 tonnes to 100,000 tonnes, making it the largest single-location plant in the western world, which provides cost advantages.
- The company's capacity utilization for Q2 FY25 was 80%, the highest among global producers, indicating efficient operations.
- HEG Ltd remains long-term debt-free with a substantial treasury size of INR923 crores as of September 30, 2024, showcasing financial stability.
- The company recorded an increase in EBITDA to INR140 crores for the quarter, compared to INR130 crores in the previous year, indicating improved operational performance.
- HEG Ltd is well-positioned to meet future demand increases due to its extensive export network and relationships, exporting two-thirds of its production to over 25 countries.
- Global crude steel production has declined, impacting the demand for graphite electrodes and putting pressure on sales prices and production.
- Electrode pricing remains under pressure due to reduced demand, affecting margins.
- The spread between electrode prices and needle coke prices has narrowed, further pressuring margins.
- The company's consolidated net profit after tax decreased to INR82 crores in Q2 FY25 from INR96 crores in the same quarter of the previous year.
- HEG Ltd faces near-term margin pressures, with expectations of continued pressure in the next few quarters due to market conditions.
A: We expect the EBITDA margin to remain in a similar range for the upcoming quarters.
Q: Considering the current demand scenario, any guidance for FY26?
A: We don't anticipate much change in the next couple of quarters. However, we expect about 20-25 million tonnes of new capacities to become operational in the second half of next year, which should increase demand.
Q: Any update on the demerger of HEG GreenTech?
A: The scheme of arrangement is currently with the stock exchange and will soon go to SEBI for approval. We expect the process to be completed by September or October 2025, and the company will be listed.
Q: What is the status of our graphite anode plant?
A: We are ready to start construction but are negotiating with state governments for power subsidies to make the project commercially viable. We expect to begin construction once we secure these benefits.
Q: How do you see the CBAM mechanism affecting industry dynamics in 2025 and 2026?
A: We are optimistic, as 100 million tonnes of new electric arc furnace capacities have been announced, with 65-70 million tonnes expected to start operations between 2025 and 2027. This should increase electrode demand significantly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.