Graphite India shares: Two factors why the stock is likely to touch Rs 440-mark

Shares of Graphite India Ltd are in focus today as ICCI Direct sees 17% upside in the stock of the graphite electrode manufacturer. It has maintained a buy call on Graphite India with a target of Rs 440.  

Graphite India stock ended 0.81% lower at Rs 372.15 in the previous trading session on BSE. Stock of Graphite India has lost 16.28% in a year and down 0.32% in 2023.  

Total 1.01 lakh shares of the firm changed hands amounting to a turnover of Rs 3.75 crore on BSE. Market cap of the firm fell to Rs 7270.90 crore on Tuesday.             

In terms of technicals, the relative strength index (RSI) of the stock stands at 72.6, signaling the stock is trading in the overbought zone. Graphite India has a one-year beta of 1.1, indicating high volatility during the period. Graphite India shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.  

The brokerage sees two triggers in the future stock performance of Graphite India.  

1. World Steel Association (WSA) forecasts that in CY23, steel demand will see a  2.3%  rebound  to  reach  1822  million  tonnes  (MT)  during  CY23  and  the demand forecast is expected to grow by 1.7% to reach 1854 MT by 2024. This augurs well for graphite electrodes demand 

2. Steel  manufacturers   are  shifting  towards   the  EAF  process,  which  is expected  to  drive  sustainable  demand  for  graphite  electrodes  in  the  long term.  The EAF process is considered to be more environmentally friendly than traditional steel production methods, making it an attractive option for companies looking to reduce their carbon footprint.  

“Graphite India stock has given a return of 82% over the last three years (from Rs 206 in May 2020 to Rs 375 in May 2023). We maintain our BUY rating on the stock. We value Graphite India at Rs 440, 6.5x FY25E EV/EBITDA,” said the brokerage.  

Graphite India reported a 69.47% fall in consolidated profit to Rs 29 crore for the fourth quarter ended March 2023 against a net profit of Rs 95 crore in the corresponding quarter of the previous fiscal. The firm reported a 3.44% fall in revenue to Rs 815 crore in the March 2023 quarter against Rs 844 crore in the March 2022 quarter. EBITDA fell 29.55% to Rs 62 crore in Q4 against Rs 88 crore in the March quarter of 2022.    

On an annual basis, net profit slipped 60.59% to Rs 199 crore for the fiscal ended March 2023 against Rs 505 crore for the fiscal ended March 2022.  However, revenue climbed 5.12% to Rs 3181 crore in the March 2023 fiscal against Rs 3026 crore for the fiscal ended March 2022. EBITDA slipped 34.32% to Rs 312 crore in the last fiscal against Rs 475 crore in the March 2022 fiscal. 

 

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