Buy Graphite India; target of Rs 590: Anand Rathi

Anand Rathi's research report on Graphite India

Aided by sequential improvement in utilisation (consolidated, from 60% to 65%) and flattish realisation, Graphite India’s revenue grew 3% q/q. With consistent growth in global steel production (up 6.5% y/y, 1.7% q/q) and a positive outlook ahead, we expect demand and realisations in graphite electrodes (GE) to rise. Also, China’s plan to raise EAF steel capacity from 11% to 20% by 2025 augers well for GE manufacturers. Cash and investment at end-Dec’20 were Rs26bn (27% of M.Cap), to be utilised for growth.

Outlook

The company has maintained its market share in Q3 FY21. We introduce FY23e and maintain our Buy rating on the stock, with a higher target of Rs590 (8x FY23e EV/EBITDA), earlier Rs373.

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