Graphite India, HEG surge 5%; Macquarie sees up to 50% upside

New Dheli (The Economic Times) -- 29 Jun 2018


Shares of Graphite IndiaNSE 4.29 % and HEGNSE 1.72 % hit upper circuit of 5 per cent on Friday after global brokerage firm Macquarie initiated coverage on graphite electrode majors with ‘Outperform’ rating. Macquarie has set target price of Rs 1,260 for Graphite India, implying 50 per cent upside in the stock, while it sees 45 per cent upside in HEG with a target price of Rs 4,810. Shares of HEG and Graphite India were hovering around Rs 3,311 and Rs 840, respectively, in afternoon session on Friday.

Macquarie believes that graphite electrode (GE) market should remain tight on supply chain bottlenecks. “With growing demand, it’s more a ‘strategic resource’ now,” it said in a report.
Despite a five-time rise in prices, Macquarie sees GE prices to remain strong for another three years, as utilisation remains on an uptrend. It still accounts for more than 5 per cent of steel cost.

Graphite India is the third largest GE producer in the world, with a 12 per cent global market share. It has 98 kilo tones per annum (ktpa) GE capacity (80 kt India, 18 kt Germany), supplies over 50 per cent of its production in the domestic market and had higher legacy contracts in FY18.

HEG is the fourth largest GE producer in the world with a 10 per cent global market share. It has 80 ktpa GE capacity with the largest single-site plant. It supplies around 25 per cent of its production in domestic market but has a higher export in India.