Buy Graphite India; target of Rs 1400: ICICI Direct

ICICI Direct's research report on Graphite India

According to media sources, officials from the Karnataka State Pollution Control Board (KSPCB) inspected two units of Graphite India (GIL) in Bengaluru. Prima facie, the team indicated the plant is not complying with the required air pollution norms. KSPCB is expected to submit a report on the same to the National Green Tribunal (NGT) in a week. Earlier, KSPCB in 2012 served the plant a closure notice on which the company got a stay from the appeals court. Following the stay, the residents approached the NGT where the case is currently pending.

Outlook

Given the strong demand and elevated prices, the operating environment continues to remain healthy for domestic graphite electrode player like Graphite India. We expect the topline, EBITDA and PAT to grow at a CAGR of 53%, 66% and 63%, respectively during FY18-FY20E. We continue to value the stock at 10x FY20E EPS of Rs 140 and arrive at a target price of Rs 1400. We reiterate our BUY recommendation on the stock.