Graphite India share turned Rs 1 lakh into Rs 25,000 in 1.5 years; here's why

Graphite India investors have suffered substantial losses in nearly 1.5 years. Graphite India share price, which closed at Rs 1,100 on August 14, 2018 ended at Rs 283 on February 14, 2020. An investment of Rs 1 lakh in Graphite India stock on August 14, 2018, would have decreased to Rs 25,727 today. The mid cap stock has lost 36.59% during the last one year and fallen 7.21% since the beginning of this year.

The stock hit a 52-week high of Rs 482.40 on March 12, 2019 and touched a 52 week low of Rs 255 on October 9, 2019. The ongoing economic slowdown has adversely impacted the demand for graphite electrodes, a primary product of the company. Graphite electrodes are used to melt scrap in electric arc furnaces to produce new steel.

Global slowdown due to the US-China trade war has led to a fall in steel demand which has affected demand for electrodes. China is the biggest producer of graphite electrodes which are used in automobile and steel industries.

In September 2018, India removed antidumping duties on graphite electrodes imported from China which led to an increase in import. Steel prices also continues to remain under pressure and combination of these factors have resulted in significant correction of electrode prices.

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This has adversely affected financial performance of Graphite India since 2018.

For quarter ended June 2018, net profit rose 77.22% to Rs 957 crore compared to net profit of Rs 540 crore for quarter ended March 2018.

On an year-on-year basis, net profit rose 3,090%. For quarter ended September 2018, the firm posted a net profit of Rs 1,113 crore. For quarter ended December 2018, net profit fell to Rs 765 crore. Since then, net profit has been falling continuously on a quarter-on-quarter basis. In fact, the firm reported a loss of Rs 353 crore for the quarter ended December 2019.

Net sales rose to Rs 1,965 crore for June 2018 quarter compared to Rs 1,323 crore in March quarter. For quarter ended June 2017, net sales stood at Rs 390 crore.

In September 2018 quarter, net sales rose to Rs 2,345 crore. Since then, net sales have been falling continuously. Sales fell to Rs 1,855 crore in December 2018 followed by Rs 1,693 crore sales for quarter ended March 2019.

In the third quarter of current fiscal, net sales fell to Rs 643 crore, a decline of 65% year-on-year.

Graphite India is engaged in the manufacturing graphite electrodes, graphite equipments, steel, glass reinforced plastic (GRP) pipes and tanks and generation of hydel power. The company operates through three segments: Graphite and carbon, steel and others.