Graphite electrode makers such as HEG and Graphite India can serve as proxy plays to capitalise on significant demand in the steel industry, Vivek Mashrani, founder of TechnoFunda Ventures, said in an interview to Moneycontrol.
However, the graphite electrode industry operates within a closed-door environment and that the stock picks are primarily based on technical analysis, rather than fundamental aspects of the business, he added.
He considers both Graphite India and HEG to be short-term plays. Graphite electrodes are use in the manufacture of steel.
Steady to rising demand amid capacity consolidation, keeping prices steady, bodes well for graphic electrode companies in the medium to long term. However, near-term headwinds led by geopolitical issues in Europe and a slowing global economy remain, SKP Securities said in a note.
HEG, via a wholly owned subsidiary, announced a strategic diversification into manufacturing graphite anodes for lithium-ion cells and allied and ancillary products at a capex of about Rs 2,000 crore in two phases.
Mashrani emphasised the importance of being selective and sticking with quality names in the midcap space to avoid potential de-ratings and losses.
In terms of themes, Mashrani highlighted the reset in the electric vehicle space, which presents opportunities for new entities including JBM Auto and Olectra GreenTech. Real estate, particularly midcap firms and proxy companies like DLF, was another area of interest.
Additionally, he mentioned the capital goods sector, as the capex cycle is turning up and infrastructure spending is expected to increase. Apar Industry and AIA Engineering are benefiting from these trends.
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