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HEG: From value play to recovery play

According to HEG management, the industry level inventory has swiftly normalised, which points to higher utilisation levels and pricing growth in electrodes in the near term

February 16, 2021 / 09:54 AM IST
HEG: From value play to recovery play

Representative Image. Courtesy : Reuters

PRO Only Highlights
Quarterly performance largely backed by improved realisations
Medium-term triggers China plus and protectionist measures for tyre industry
Valuations not inexpensive; but improved medium-term outlook

Highlights - Strong operating performance in steel industry aids GE players - GE channel inventory normalized; pricing growth to pick up in FY22 - Long gestation period for new capacity remains a key barrier to entry - Operating leverage play to be re-rating trigger In our last note for HEG (CMP: Rs 1,239; Mkt Cap: Rs 4,785 crore), we dwelt  on two factors to get constructive. Firstly, market implied valuation was below replacement cost for HEG and we thought that sooner or later value play will catch up...

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