HEG crashes over 7% as Q1 results show net profit fell 83%; stock split announced

Shares of graphite electrode manufacturer HEG Ltd. fell sharply by over 7 percent on Wednesday in a flat market after the company reported disappointing results for the June quarter (Q1FY25). The significant drop in profit and revenue led to a bearish sentiment among investors.

HEG reported a steep 83.4 percent year-on-year (YoY) decline in net profit for the June quarter, plummeting to ₹23 crore from ₹139 crore in the same period last year. The company’s total income also decreased by 15 percent, coming in at ₹591.90 crore compared to ₹697.55 crore a year ago.

This disappointing financial performance caused the stock to drop as much as 7.2 percent in intra-day trading, reaching a low of ₹2,011. With this decline, HEG's stock is now nearly 27 percent below its 52-week high of ₹2,744.60, which was achieved on May 22, 2024. However, it remains 37 percent above its 52-week low of ₹1,466.85, recorded on October 26, 2023.

Despite the recent dip, HEG's stock has risen nearly 26 percent over the past year and has gained over 5 percent year-to-date in 2024.

Meanwhile, the company’s Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) also saw a significant decline, falling by 73 percent YoY to ₹38 crore. This drop was reflected in the EBITDA margin, which decreased to 6.7 percent from 21 percent during the same quarter last year. The decline in margins was primarily due to a 37 percent increase in other expenses. However, the company did report a sequential expansion of 500 basis points in its gross margin.

Stock Split

In an effort to enhance liquidity and attract more investors, HEG also announced a stock split, dividing each equity share with a face value of ₹10 into five shares with a face value of ₹2 each. This move marks the first time HEG has opted for a stock split, although the company previously conducted a buyback of equity shares in 2019 but has never issued a bonus. Record date for the stock split is yet to be announced.

"Sub-division/ split of each equity share of face value of ₹10/- (Rupees Ten only) each, fully paid-up into 5 (Five) equity shares of face value of ₹2/- (Rupee Two only) each, fully paidup by alteration of Capital Clause of the Memorandum of Association of the Company, subject to the approval of the members of the Company to be sought through Postal Ballot. The Record Date for sub-division/ split of existing equity shares will be intimated in due course," said the firm in a communication to bourses.

HEG, a key manufacturer of graphite electrodes used in steel production through the Electric Arc Furnace (EAF) route, continues to play a critical role in the steel industry, which is increasingly favoring the less polluting EAF method over traditional blast furnaces.