HEG Limited — Investor Meet, 19-11-2024: Analysts/Institutional Investor Meet/Con. Call Updates

**Financial Performance:** HEG reported revenue of ₹568 crores for Q2 FY25, down from ₹614 crores YoY. EBITDA improved to ₹140 crores from ₹130 crores in the same quarter last year, resulting in an EBITDA margin of 24.6%. Net profit remained stable at ₹62 crores on a standalone basis, while consolidated profit decreased slightly to ₹82 crores from ₹96 crores YoY. The company's debt-free status and a treasury size of ₹923 crores as of September 30, 2024, reflects its strong liquidity position.

**Future Outlook and Growth Drivers:** Management remains optimistic about long-term growth despite near-term margin pressures due to subdued electrode pricing. The recent expansion from 80,000 tons to 100,000 tons of capacity has positioned HEG as the largest producer in the Western world, enhancing cost advantages. The global shift towards electric arc furnace capacities is expected to generate renewed demand for graphite electrodes from 2025 onwards.

**Order Book and Operational Updates:** Capacity utilization reached approximately 80%, the highest among global producers. HEG anticipates demand to pick up in the second half of 2025, supported by ongoing infrastructure projects in India and increased international demand.

**Analyst Q&A Insights:** Analysts sought clarity on margin outlook, with management indicating stable margins for the coming quarters. Concerns about competition, particularly from Chinese imports, were addressed with confidence in HEG's quality and operational efficiencies. Management also elaborated on the status of the demerger of HEG Greentech, with a timeline for completion by late 2025.

**Market or Regulatory Updates:** Global steel production trends show a decline in major regions, except for India, where production increased by 5.5%. This trend may impact the demand for electrodes, as demand diminishes in a fragile market.

**Strategic Focus Areas:** HEG's management is focused on expanding its market share and enhancing operational efficiencies amid competitive pressures. There’s an ongoing effort towards improving sustainability through the electrification of production processes.

**Investor Insight:** Given the stable financial performance and the favorable long-term outlook for the graphite electrode demand as the industry pivots toward electric arc furnace methods, the company exhibits potential for growth. A cautious stance is advisable given current market pressures, but longer-term prospects suggest a favorable position for a buy-in when conditions stabilize.