ICICI Direct's research report on Graphite India
Graphite India (GIL) reported an operationally subdued set of Q2FY21 numbers. It reported a consolidated loss at the EBITDA, PAT level. We had also estimated an EBITDA loss and net loss for the company on the back of a muted operating environment. For Q2FY21, GIL reported a consolidated topline of Rs 485 crore (down 45% YoY, up 19% QoQ), higher than our estimate of Rs 418 crore. The better-than-expected topline was on account of higher-than-expected capacity utilisation. Consolidated capacity utilisation in Q2FY21 was at 60% (61% in Q2FY20, 36% in Q1FY21), higher than our estimate of 45%. Consolidated EBITDA loss came in at Rs 78 crore (our estimate of consolidated EBITDA loss of Rs 84 crore). Consolidated other income for the quarter was at Rs 50 crore (down 2% YoY, 26% QoQ), in line with our estimate of Rs 50 crore. Subsequently, net consolidated loss for the quarter was at Rs 41 crore (our estimate of net loss was Rs 52 crore).
Outlook
Going forward, on the global demand side, destocking of electrode inventory at customer end, which was delayed due to the Covid-19 crisis has now resumed. With respect to raw material costs, while needle coke prices have softened, they have not yet fully realigned with electrode prices. Hence, it is likely to lead to elevated input costs in the near term. GIL’s balance-sheet remains robust with consolidated net cash balance of Rs 2404 crore at the end of September 2020. We value the stock at 4x FY22E EV/EBITDA and arrive at a target price of Rs 185. We maintain out HOLD recommendation on the stock.
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