HEG

Global crude steel production in Q1 2026 declined by 2% YoY to 459 million tons, with China-driven recovery. Excluding China, global steel production declined 1.3% over Q4 2025. India remains a standout performer with 5% QoQ growth. The structural shift towards Electric Arc Furnace (EAF) steelmaking, driven by decarbonization policies and trade realignments like CBAM, is expected to significantly boost long-term demand for graphite electrodes. New EAF capacity additions of 60 million tons by 2028 and 30 million tons by 2030 (ex-China) are projected to create incremental electrode demand of 200,000 tons by 2030.

HEG delivered strong full-year FY26 results, with revenue growing 19.32% to ₹2,569 crores and EBITDA increasing 28.09% to ₹497 crores, pushing margins from 17% to 19%. Net profit for the year surged 79.21% to ₹181 crores. The company maintained over 90% capacity utilization throughout the year, reaching 95% production utilization in Q4. However, Q4 FY26 reported a loss of ₹189 crores, primarily due to ₹35-40 crores in unrealized fair value losses on foreign investments and rapid rupee depreciation, alongside a 1,000-ton QoQ sales volume dip due to regional mix and postponed Middle East orders.

HEG has successfully expanded its capacity from 80,000 to 100,000 tons and plans a further expansion to 115,000 tons, expected to be operational by early 2028. The company's plant near Bhopal remains the largest single-site electrode plant globally, contributing to its cost competitiveness. Management emphasized its focus on operational efficiency, cost discipline, and customer diversification to deliver resilient performance.

HEG reaffirmed its long-term strategic investment in GrafTech, made 1.5-2 years ago, citing GrafTech's 75-80% backward integration into needle coke production. This integration provides a hedge against the cyclical volatility and price surges seen in needle coke, which is critical for electrode manufacturing. The composite scheme of arrangement related to this investment is progressing, with NCLT meetings scheduled for May 5, 2026, and expected approval in Q2 FY27.

The company is actively seeking price increases for unbooked orders in H2 FY27, acknowledging the necessity due to rising energy and freight costs. While needle coke purchases are covered until September, other input costs are subject to market fluctuations. Management noted that the industry has been seeking price increases for the past two years due to unsustainable margins, with recent geopolitical events acting as a catalyst for current price adjustments.

The TACC Greentech venture is making good progress with customer qualification processes, engaging with leading OEMs globally. The plant commissioning date from April remains on track, with expectations of achieving 40-60% capacity utilization in its first year of operation. No technological bottlenecks have been identified, indicating a smooth ramp-up for the new business segment.

HEG maintains a strong financial position with no long-term debt as of March 31, 2026, and a treasury of approximately ₹792 crores. The Board has recommended a final dividend of ₹3.4 per equity share for FY26, reflecting the company's commitment to shareholder returns despite the Q4 reported loss driven by non-operating factors.