Buy Graphite, India; target of Rs 373: Anand Rathi

Anand Rathi's research report on Graphite, India

Weak demand and heightened inventory led to Graphite India’s (GRIL) subdued realisations and lower sales volumes (last six quarters). We expect it to benefit, however, from coming tailwinds: 1) A pick-up in steel production globally (up 2.3% y/y in Q2 FY21); 2) the recent rebound in graphite-electrode (GE) prices in China; 3) expectations of complete destocking of electrode stocks in the next two quarters and 4) benign raw material prices. Q2 FY21 capacity utilisation improved sequentially from 42% to 72%, which, we believe would continue.

Outlook

Hence, we turn positive on the company, thereby upgrading our rating from a Sell to a Buy, with a revised target price of Rs373 (8x FY22 EV/EBITDA), earlier Rs212.