HEG Limited Q1 FY23 Earnings Conference Call Insights

Key highlights from HEG Limited (HEG) Q1 FY23 Earnings Concall

Q&A Highlights:

• Dhawal Doshi of Pinpoint Asset asked how the company is seeing needle coke pricing given crude has started correcting. Manish Gulati ED said the needle coke prices for the last two quarters, purchase prices have been at almost same level to earlier.

• Dhawal Doshi of Pinpoint Asset also enquired if there can be near term challenges in demand with respect to the operating environment. Manish Gulati ED said the volumes are subdued, prices are stable. But volumes due to order pushbacks from Europe, there will be lesser volumes expected in July to Sept. 2022. It might continue in Oct. to Dec. beyond that it should turnaround.

• Sonal Salgaonkar with Jefferies asked about the capacity utilization in 1Q23 vs. 1Q22. Manish Gulati ED replied that it was 92% for 1Q23 vs. 85% in 1Q22. HEG added that 92% is the highest and the best capacity utilization it has done.

• Sonal Salgaonkar with Jefferies enquired about the country-wide export mix and Europe’s contribution.  Manish Gulati ED replied the company exports to about 35 countries and it’s well diversified. The main areas of export are US, Middle East, Europe, and Southeast Asia in that order. In Europe, sales was 10-11% in FY22.

• Sonal Salgaonkar with Jefferies asked about the quantum of price hikes in 1Q23 and cumulative hikes over the past four quarters. Manish Gulati ED clarified that it was in the range of 3.5-4%. Cumulatively the price hikes were in the range of more than 50%.

• Sonal Salgaonkar with Jefferies enquired about the overall capex of INR12 billion and how much of that is spent and plans to spend in the future. Manish Gulati ED answered that almost INR900 million is already spend and about INR300 million will be spent by March 2023.

• Sonal Salgaonkar with Jefferies asked about the update on the China electrode supply. Manish Gulati ED clarified that the company does not compete with China in the ultra-high power grade market.

• Pranav Jain of HDFC asked if the company is foreseeing any problem in selling its incremental volumes of 20,000 tonnes, considering the situation in Europe.  Manish Gulati ED said that for next two quarters demand seems subdued, precipitated by Russia Ukraine war. However HEG added that it should improve going forward beyond that.

• Pranav Jain of HDFC enquired about the incremental depreciation in 4Q23 and 1Q24.  Gulshan Sakhuja CFO said it is coming at the capitalization of INR1,200 crore in next FY24. So the additional depreciation that’s going to come is around INR10-12 crore per quarter of additional depreciation in FY24.

• Rajesh Agarwal from Moneyore asked about the outlook in the US in terms of demand and supply. Manish Gulati ED answered that the US steel production is doing good and the capacity utilization there is in excess of 80%. So the outlook in US steel production and demand for electrodes is good.