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Graphite India hits 14-month low on disappointing Q3 results; slips 10%

SI Reporter/Mumbai 11 Feb 19 | 10:35 AM

Shares of Graphite India hit a 14-month low of Rs 436, down 10 per cent on Monday, extending its 6 per cent decline in the past two trading days on BSE, after reporting subdued results for the quarter ended December 2018 (Q3FY19).

The stock of graphite electrode maker was trading at its lowest level since October 26, 2017. Thus far in the calendar year 2019, it has tanked 42 per cent, as compared to a 1 per cent rise in the S&P BSE Sensex.

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Graphite India reported a consolidated net profit of Rs 764 crore (up 113 per cent YoY, down 31 per cent QoQ). Revenue was at Rs 1,855 crore (up 81 per cent YoY, down 21 per cent QoQ). Ebitda (earnings before interest, taxation, depreciation and ammortisation) margin was down 100 basis points sequentially at 62 per cent.

The performance during the quarter was impacted by higher-than-expected operating costs (especially needle coke) and lower-than-expected volumes.

Graphite India said the price realisation have remained flat while volumes declined from last quarter. The increase in needle coke costs has impacted margins.

The key dynamics behind these results being a combination of the stabilisation of electrode prices globally, lower volumes and increase in needle coke cost. Graphite electrode prices have since softened due to a combination of factors like weak global steel prices, increased Chinese imports into India and selected trade restrictions placed by the US. Needle coke price increase has continued to impact margins, it added.

Graphite electrodes are used in the EAF route of steel-making. Needle coke is a key raw material used in manufacture of UHP grade graphite electrodes. As needle coke is scarce in supply, its prices are on a sustained uptrend. In a scenario of softening graphite electrode prices, an uptick in needle coke costs is likely to impact the margin profile of Graphite India.

“While Graphite India reported a healthy 9MFY19 on the back of favourable realisations and relatively subdued operating costs, we expect operating profit margins to decline from supernormal levels of 67.5 per cent in 9MFY19 to around 41 per cent in FY20E. This is on account of a steep rise in price of key raw material (needle coke) and the fall witnessed in prices of graphite electrodes in both UHP grade (on account of recent weakness in steel prices) and HP grade (on account of removal of anti-dumping duty from China) electrodes," analysts at ICICI Securities said in result update.

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