HEG Limited — Investor Meet, 18-02-2025: Analysts/Institutional Investor Meet/Con. Call Updates

1. **Financial Performance:** HEG recorded Q3 FY25 revenue of ₹477 crores, down from ₹562 crores year-over-year. EBITDA stood at ₹194 crores compared to ₹110 crores last year, while net profit after tax increased to ₹98 crores from ₹37 crores for the standalone results. Consolidated net profit reached ₹83 crores, up from ₹44 crores. The company remains debt-free with a treasury size of approximately ₹1,000 crores as of December 31, 2024.

2. **Future Outlook and Growth Drivers:** Management expressed optimism about medium to long-term demand recovery in graphite electrodes, anticipating new electric arc furnaces to generate increased demand in the latter half of FY25. Despite current pressures on electrode prices, a potential improvement in pricing was noted as high-cost producers are unable to sustain operations.

3. **Order Book and Operational Updates:** The plant is operating at an 80% capacity utilization rate since expanding to 100,000 tons, the highest among graphite electrode manufacturers globally. A demerger process is underway to unlock shareholder value, with approval expected by year-end.

4. **Analyst Q&A Insights (Detailed):**

- **Revenue and Profitability:** Analysts are keen on management's perspective on pricing strategies as competitors have announced price hikes. Management confirmed they are positioned competitively but emphasized the market acceptance of such price increases is uncertain.

- **Market Position and Competitive Landscape:** Analyst queries revealed concerns regarding competition from Chinese producers, but management reinforced that HEG's product quality differentiates it from Chinese offerings.

- **Operational Challenges or Risks:** Supply chain dynamics and potential U.S. import duties were discussed. Management showed confidence in absorbing potential duties while maintaining margins.

- **Capex and Capital Allocation:** Analysts probed the capital expenditure for the new anode business, which is projected at ₹1,700-₹1,800 crores, expected to be operational by late 2026.

- **Strategic Priorities and Long-Term Vision:** The focus on developing sustainable, low-carbon emittance production methods was highlighted, addressing the increased importance of environmental standards globally.

5. **Market or Regulatory Updates:** The management briefly touched on regulatory changes in duty structures impacting their competitive positioning, emphasizing their readiness to adapt.

6. **Strategic Focus Areas:** There is a clear emphasis on innovation, operational efficiency, and expansion into new product lines, particularly the anode manufacturing segment, underpinning management’s growth strategy.

7. **Investor Insight:** Given HEG’s solid financial standing and promising outlook for demand recovery amid potential industry pricing improvements, it presents a favorable scenario for a ‘buy’ position, despite ongoing market fluctuations and external pressures. The ongoing developments in the anode project could further bolster the company’s growth trajectory.