Big rally, crashing valuations: The curious case of graphite electrode firms
Graphite electrode makers HEG Ltd and Graphite India are seen to have reached the peak of their earnings cycle, and this supernormal growth in profitability may not sustain going ahead
Shares of graphite electrodes manufacturer HEG Ltd have risen 28-fold since early 2017. Peer Graphite India Ltd’s shares have risen about 13-fold in the same period. And in a strange turn of events, this massive rally has been accompanied by a huge compression in their price-earnings (P-E) ratio. A year ago, HEG traded at a P-E multiple of 67 times, based on its trailing 12-months earnings. Now, its P-E multiple stands at merely six times.
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