HEG shares at 52-week high; can they cross Rs 2,400 mark?

Shares of graphite electrode manufacturer HEG Ltd surged 19% in an otherwise subdued market in the previous session. During the session, the stock hit a 52-week high of Rs 1,686.95 rising 18.85% on BSE.  

 The stock has gained 62.26% in a year and risen 58.77% since the beginning of this year. Total 2.06 lakh shares of HEG changed hands amounting to a turnover of Rs 32.08 crore on BSE. Market cap of the firm rose to Rs 6321.94 crore.  

In terms of technicals, the relative strength index (RSI) of HEG stood at 86.4, signaling it's trading in the overbought zone. HEG stock has a one-year beta of 1, indicating average volatility during the period. HEG shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages. 

InCred Equities has initiated coverage on the stock with an add call and target price of Rs 2462.  

“The beginning of inventory cycle decline for US steel mills, new EAF capacity addition in the US (11.45 mt) and HEG’s foray into making graphite anodes for lithium-ion batteries makes it a strong bet in the next 12 to 18 months. We value HEG at 1.8x P/BV, 0.5 SD from the historical mean of 1.3x, and initiate coverage on it with an ADD rating and a target price of Rs 2,462,” said the brokerage.  

“HEG is likely to register a 6% volume CAGR over FY24F-26F, and in the meantime its RoE is expected to rise from 8.6% in FY23 to 12.2% inFY25F. We have assigned an ADD rating to the stock with a target price of Rs 2,462 and a P/BV of 1.8x, 0.5 standard deviation (SD) from its historical mean of 1.3,” it added.   

HEG reported a 23% fall in consolidated profit to Rs 99.72 crore for the fourth quarter ended March 2023 against a net profit of Rs 129.27 crore in the corresponding quarter of the previous fiscal. The firm reported a 8.35% fall in revenue to Rs 616.88 crore in the March 2023 quarter against Rs 673.06 crore in the March 2022 quarter. EBITDA fell 21.31% to Rs 123.45 crore in Q4 against Rs 156.89 crore in the March quarter of 2022.    

On an annual basis, net profit rose 23.50% to Rs 532.36 crore for the fiscal ended March 2023 against Rs 431.05 crore for the fiscal ended March 2022. Revenue climbed 12% to Rs 2467 crore in the March 2023 fiscal against Rs 2201 crore for the fiscal ended March 2022.   

HEG is a manufacturer of graphite electrodes, which are used as a raw material in steel production via the EAF route, significantly less polluting (three-fourths reduced emission) vs. the more traditional blast furnace or BF route.