HEG Limited

HEG reported a strong operational Q4 FY25 with an EBITDA margin of 27%, which was the highest for the year, contributing to a full-year average of 21%. Excluding a mark-to-market loss on investments, Q4 was the best performing quarter with a PBT of Rs. 88 crores. For the full year FY25, revenue from operations stood at Rs. 2,153 crores, compared to Rs. 2,395 crores in the previous fiscal year. The company delivered an EBITDA of Rs. 388 crores and a consolidated net profit after tax of Rs. 115 crores for FY25.

The global graphite electrode industry has experienced significant capacity reductions, with approximately 120,000 tons (18% of total capacity excluding China and Russia) being shut down or downsized by major players like Resonac, Tokai Carbon, and GrafTech. This consolidation, combined with an anticipated 35-40 million tons of new greenfield electric arc furnace (EAF) capacities expected in the next 18 months, is projected to stabilize demand-supply dynamics. Management believes current electrode prices are unsustainable and hopes for price firming in the coming quarters^⏳, potentially within 2-4 quarters.

HEG is progressing with its new graphite anode plant project, targeting commissioning by April 2027. The total CAPEX for this project is estimated at Rs. 1850 crores, with over Rs. 100 crores already spent and almost 100% of the total CAPEX expected to be committed within FY26. The project will be funded through a mix of debt and equity. The plant will start with a capacity of 20,000 tons, with plans to double it in 4-5 years, aiming to capitalize on the 'China Plus One' strategy and a projected domestic demand of 100,000-140,000 tons by 2030.

HEG invested Rs. 282 crores to acquire a 9.98% equity stake in GrafTech International. Due to the decline in GrafTech's share price, HEG recorded a mark-to-market loss of Rs. 160 crores in Q4 FY25 and Rs. 80 crores for the full year FY25. This accounting adjustment impacted the reported profitability for the quarter and the fiscal year.

HEG operated at a high capacity utilization of close to 80% for FY25, based on its expanded 100,000 tons capacity, and aims to maintain or increase this level in the current year. The company positions itself as one of the lowest-cost producers globally, benefiting from its large single-location capacity. Exports constitute about two-thirds of its sales, with a diversified sales footprint across more than 25-30 countries, indicating a strong global presence and market penetration.

The company maintains a strong financial position, being long-term debt-free with a treasury size of approximately Rs. 875 crores as of March 31, 2025. The board recommended a final dividend of Rs. 1.80 per equity share (90% of face value) for FY25. The demerger scheme has been filed with regulatory authorities, and approvals are expected by the end of calendar year 2025, signaling a potential corporate restructuring event.

Needle coke prices, a key raw material, have remained stable for the past three quarters and are expected to continue this trend in the near term, which is favorable for cost management. HEG is actively exploring renewable energy options to reduce power costs, including expanding its internal solar capacity (adding another 3 MW to existing 3 MW) and evaluating offers from the state discom, though current renewable options are more expensive by over 50 paisa per unit.