Active Stocks
Sat May 18 2024 12:29:54
  1. Tata Motors share price
  2. 953.75 0.85%
  1. Power Grid Corporation Of India share price
  2. 316.10 0.88%
  1. ITC share price
  2. 436.50 -0.02%
  1. Tata Steel share price
  2. 167.90 0.39%
  1. State Bank Of India share price
  2. 820.35 0.31%
Business News/ Markets / Stock Markets/  Multibagger stock: HEG skyrocketed over 105% in a year, up 365% in 4 years; should you still buy?
BackBack

Multibagger stock: HEG skyrocketed over 105% in a year, up 365% in 4 years; should you still buy?

HEG, a leading graphite electrode manufacturer in India, has seen a remarkable turnaround with shares surging from ₹920.70 to ₹1902, rewarding shareholders with a 107% return. From its March 2020 low of ₹409, the shares are currently trading with a gain of 365%.

With its largest single-site plant boasting a capacity of 100,000 tons, including a new capacity of 20,000 tons, the brokerage expects the company will benefit significantly from the growing demand for graphite electrodes.  (Pixabay)Premium
With its largest single-site plant boasting a capacity of 100,000 tons, including a new capacity of 20,000 tons, the brokerage expects the company will benefit significantly from the growing demand for graphite electrodes.  (Pixabay)

In the past year alone, the Indian stock market has produced many multibaggers, particularly in the mid-and small-cap segments. Among these, HEG, one of the leading graphite electrode manufacturers in India, is one such stock. 

After experiencing a prolonged downward trend from October 2021 to March 2023, the company's shares experienced a notable rebound in the subsequent month. Since then, they have consistently followed an upward trajectory, surging from 920.70 to the current trading price of 1,902. 

Also Read: Holi 2014 to Holi 2024: Nifty 50 zooms over 200%, these 14 stocks skyrocket 3,900%

This remarkable turnaround has rewarded its shareholders with an impressive return of 107%. From its March 2020 low of 409, the shares are currently trading with a gain of 365%. 

HEG is a prominent entity within the LNJ Bhilwara Group, which has a diverse portfolio spanning IT-enabled services, power generation, graphite electrodes, and textiles. It was established in 1977 and is one of the world’s leading producers of graphite electrode, specialising in sophisticated UHP (Ultra High Power) electrodes. 

It operates the world’s largest single-site graphite electrode plant under one roof with a capacity of 80,000 tons per year for a long time. Recently expanded to 100,000 tons, it now ranks as the third largest producer in the Western world.

Also Read: Cochin Shipyard share price soars 298% in one year; can this upside momentum continue?

Domestic brokerage firm ICICI Direct Research has assigned a 'buy' rating to HEG on the back of structural demand drivers in place amid an ongoing global shift towards the EAF route of steelmaking, capacity expansion-led volume growth in the offering, and graphite anode business.

The brokerage assigned a target price of 2,420 apiece to HEG shares, which signalled an upside potential of 27.3% from the stock's previous closing price. 

Global shift towards the EAF route

The brokerage has pointed out that global steel manufacturers are increasingly adopting the Electric Arc Furnace (EAF) route for steel production to reduce carbon emissions by approximately 75% compared to traditional methods like blast furnaces (BOF).

EAF's share in global crude steel production (excluding China) has risen from around 44% in 2015 to approximately 50% in 2022, with projections indicating a further increase to about 55% in the coming years. 

Also Read: Over 50 smallcap stocks log double-digit growth as broader indices gain 1.5%; Reliance Infra, BEML among gainers

By 2030, it is anticipated that over 170 million tons of EAF capacity (excluding China) will be added, resulting in an additional demand for graphite electrodes, a crucial component in EAF, by approximately 200,000 tons compared to the current industry size of around 800,000 tons, as stated by the brokerage. 

Strong Positioning

The brokerage said that the company is positioned as one of the top five global graphite electrode producers and is poised to capitalise on this trend towards environmentally friendly steel production.

Also Read: FPIs pump 38,098 crore in Indian equities, debt inflows at 13,223 crore; Will the trend continue in FY25?

With its largest single-site plant boasting a capacity of 100,000 tons, including a new capacity of 20,000 tons, the brokerage expects the company will benefit significantly from the growing demand for graphite electrodes. 

Promising prospects await in a new venture

Li-On batteries are the new sunrise sector catering to E-mobility space (Electric Vehicles) & stationary applications, with demand pegged at 150–160 GWh by 2030, resulting in 1.5 lakh tons of demand for graphite anode, a key component in lithium-ion cells. 

As the government aims to localise significant segments of battery components, HEG aims to seize this opportunity by venturing into the manufacturing of graphite anode. 

"HEG aims to seize this opportunity by venturing into the manufacturing of graphite anode. HEG is setting up a capacity of 20,000 tons of this material (catering to ~20 GWh of cell capacity) at a capex cost of 1,700–1,800 crore with expected commissioning in H2FY26 and an intended asset turnover of 1-1.1x, EBITDA margins of 25%+, and a RoCE of 20%," said ICICI Direct Research. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

 

 

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed - it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 25 Mar 2024, 02:55 PM IST
Next Story footLogo
Recommended For You
GENIE RECOMMENDS

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started