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Graphite India shares gain on robust Q4 FY21; ICICI Direct retains buy with 27% upside

The company reported a net profit of Rs 64 crore in the quarter ended March 2021 against a loss of Rs 7 crore in the year-ago period.

June 30, 2021 / 11:05 AM IST
Graphite India  | In FY21 so far, the stock has risen 137 percent to Rs 301.05 as on January 25, 2021, from Rs 127.10 as on March 31, 2020. MFs increased their holding in each quarter of the fiscal - June quarter: 0.75% September quarter: 1.34%, and December quarter: 3.3%.

Graphite India  | In FY21 so far, the stock has risen 137 percent to Rs 301.05 as on January 25, 2021, from Rs 127.10 as on March 31, 2020. MFs increased their holding in each quarter of the fiscal - June quarter: 0.75% September quarter: 1.34%, and December quarter: 3.3%.

 
 
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Graphite India share price added 2 percent intraday on June 30 after the company turned profitable in Q4 FY21.

The company reported a net profit of Rs 64 crore in the quarter ended March 2021 against a loss of Rs 7 crore in the year-ago period.

The sharp turnaround in profits was driven by a dip in material costs resulting in positive EBITDA margins in the current quarter.

Net sales of the company, however, declined 6 percent YoY to Rs 565 crore.

The company reported consolidated EBITDA (earnings before interest, taxes, depreciation, and amortisation) of Rs 78 crore, while margin was at 13.8 percent.

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The stock was trading at Rs 644.65, up Rs 13.95, or 2.21 percent, at the time of writing this copy. It touched an intraday high of Rs 650.00 and an intraday low of Rs 638.65.

Looking ahead, the management remains optimistic with the ongoing recovery in demand for electrodes and stabilization of prices. Graphite India is well positioned to cater to the growing demand for electrodes and maintain its strong liquidity and balance sheet position, the management said.

Research and broking firm ICICI Direct has maintained a buy call on the stock with a target of Rs 800 per share.

"During Q4 FY21, electrode prices started to recover from the lows. Furthermore, with increased steel production around the world, demand for electrodes has started to pick up and prices have started to stabilise. This augurs well for Graphite India, which is the largest Indian producer of graphite electrode," it said.

"We value the stock at 6.5x FY23E EV/EBITDA and arrive at a target price of Rs 800 and maintain our buy recommendation on the stock," the brokerage firm added.

ICICI Direct further said that the gradual pick-up in demand from steel consuming sectors in H2 FY21 has led to increase in demand for steel and electrode. "The lower exports from China may bode well for other EAF steel producing nations, thereby likely to have a positive rub-off on graphite electrode demand," it said.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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first published: Jun 30, 2021 11:05 am
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