HEG Limited: The World’s Graphite Electrode Maker

“The next two, three quarters may see margins coming under some pressure, but we are fully confident of the demands coming back from 2024 onwards and we will take full advantage of our expanded capacity and competitive costs. We have all the technological capabilities, operational efficiencies, and market reach to take our company forward and to succeed and thrive in all emerging situations to create long-term value for our shareholders.”

– Mr. Ravi Jhunjhunwala, Chairman & Managing Director, HEG Ltd. on Q1FY24 ConCall

Stock Data
Ticker	HEG
Exchange	NSE
Industry	GRAPHITE ELECTRODE

Price Performance
Last 5 Days	+0.07%
YTD	+62.27%
Last 12 Months	+37.97%

*As of 31.08.2023

Company Description & Strengths:

HEG Limited is an Indian company that manufactures graphite electrodes, power, and carbon specialty products. The company’s business model is based on the following key factors:

Vertical integration: HEG has a vertically integrated business model, which means that it controls the entire value chain of its products, from the mining of raw materials to the manufacturing and distribution of finished products. This gives the company a high degree of control over its costs and quality, and allows it to pass on cost savings to its customers.

For example, HEG owns its own graphite mines, which gives it a secure supply of raw materials. The company also has its own manufacturing facilities, which allows it to control the quality of its products. Additionally, HEG has its own distribution network, which allows it to deliver its products to customers quickly and efficiently.

Focus on innovation: HEG is constantly investing in research and development to develop new products and improve the efficiency of its manufacturing processes. This helps the company to stay ahead of the competition and meet the needs of its customers.

For example, HEG has developed a new type of graphite electrode that is more efficient and durable than traditional electrodes. The company is also investing in new technologies to reduce its environmental impact.

Global reach: HEG exports over 70% of its production to more than 30 countries around the world. This gives the company access to a large and growing market, and helps to mitigate the risks associated with any one market.

For example, HEG has a strong presence in China, which is the world’s largest market for graphite electrodes. The company also has a growing presence in emerging markets, such as India and Southeast Asia.

Sustainability: HEG is committed to sustainable development. The company has a number of initiatives in place to reduce its environmental impact, such as using renewable energy sources and recycling waste materials.

For example, HEG has installed solar panels at its manufacturing facilities to generate its own electricity. The company is also working to reduce the amount of waste it produces.

Strong financial position: HEG has a strong financial position, with a healthy balance sheet and a good track record of profitability. This financial strength gives the company the resources to invest in growth and innovation.

For example, HEG has recently invested in a new manufacturing facility in India. The company is also investing in research and development to develop new products.

Overall, HEG Limited is a well-run company with a strong track record of success. The company has a number of key strengths that have helped it to become one of the leading graphite electrode manufacturers in the world. These strengths are likely to help the company to continue to grow in the future.

Financial Results:

HEG Ltd reported Revenues for Q1FY24 of ₹671.00 Crores down from ₹722.00 Crore year on year, a fall of 7.06%.

Total Expenses for Q1FY24 of ₹567.00 Crores up from ₹563.00 Crores year on year, a rise of 0.71%.

Consolidated Net Profit of ₹139.00 Crores down 12.58% from  ₹159.00 Crores in the same quarter of the previous year.

The Earnings per Share is ₹36.05, down 12.50% from ₹41.20 in the same quarter of the previous year.

Key Weaknesses:

Dependence on a few customers: HEG’s largest customer accounts for about 20% of its revenue. This dependence on a few customers could make the company vulnerable to fluctuations in demand from these customers.

High fixed costs: HEG has high fixed costs, due to its vertically integrated business model. This means that the company needs to generate a significant amount of revenue in order to cover its fixed costs.

Competition from Chinese manufacturers: Chinese manufacturers are major producers of graphite electrodes. These manufacturers have competitive costs, which could make it difficult for HEG to compete.