HEG (HEG) Q1 24/25 earnings summary

Executive summary

• Q1 FY25 revenue from operations was ₹571.46 crore, down from ₹671.43 crore year-over-year, reflecting subdued demand and pricing pressure in the graphite electrode market.

• Standalone net profit after tax was ₹2.58 crore, compared to ₹97.56 crore in Q1 FY24; consolidated net profit after tax was ₹23.04 crore, down from ₹139.12 crore year-over-year.

• Margins remain under pressure due to global steel market weakness, increased Chinese steel exports, and oversupply in the graphite electrode market.

• Operational performance and capacity utilization remain strong relative to peers, with the company completing its graphite electrode plant expansion to 100,000 tons, making it the third largest producer in the western world.

• Board approved unaudited financial results, share split, new independent directors, and a major restructuring scheme, all pending regulatory approvals.

Financial highlights

• Standalone EBITDA for Q1 FY25 was ₹59 crore, with an EBITDA margin of 10%, down from 26.5% in Q1 FY24.

• Treasury and investments totaled ₹1,015 crore as of June 30, 2024; company remains long-term debt free.

• One-time mark-to-market loss of ₹31 crore on equity investment booked under other expenses.

• Short-term working capital borrowings were ₹599 crore at quarter-end.

• Earnings per share (EPS) for Q1 FY25 stood at ₹0.67 standalone and ₹5.97 consolidated.

Outlook and guidance

• Capacity utilization for Q1 FY25 was close to 80%; expected to be around 75% for the full year.

• Margins and graphite electrode demand expected to remain under pressure for 2-3 quarters; demand recovery anticipated from 2025 onwards, with decarbonization initiatives projected to drive additional demand by 2030.

• Expanded electrode capacity to 120,000 tons per annum positions the company for future demand growth.

• No adjustments made for the proposed demerger and amalgamation scheme pending regulatory approvals.