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D i s m a l p e r f o r m a n c e …
HEG reported its results for Q1FY12 that were lower than our estimates.
Revenues for the quarter stood at | 279.5 crore higher ~ 25.8% YoY but
lower ~0.7% QoQ (our estimate: | 308.3 crore). The performance during
the quarter under review was impacted on account of one-off process
loss in graphite electrodes segment. The volume loss for the same was
~4-5% while the impact was to the tune of ~ | 10 crore. Furthermore, the
thermal plants operated below par on account of maintenance shutdown.
Operating margins were also under pressure on account of higher costs
of furnace oil and LDO. As a result, the EBITDA margin contracted ~ 990
bps YoY and ~480 bps QoQ. EBITDA stood at | 44.1 crore (lower 22.7%
YoY and 24.1% QoQ) (our estimate: | 59.5 crore). The ensuing PAT stood
at | 19.8 crore (our estimate: | 31.2 crore) lower by 25.5% YoY and
42.5% QoQ.
ƒ Capacity expansion well on schedule
Phase I of capacity expansion from 66,000 tonnes per annum (TPA)
to 80,000 TPA is now operational and the full capacity commercial
production is expected to be operational by Q3FY12. An investment
of approximately | 275 crore had been earmarked for the expansion.
Total expansion capex is being funded through a mix of debt and
internal accruals.
V a l u a t i o n
At the CMP of | 226, the stock is trading at FY13E P/E of 7.7x and FY13E
EV/EBITDA of 5.9x. We have valued the stock at a 20% discount to the
global average of 6.8x CY12E EV/EBITDA, thus arriving at a target price of
| 219. We are assigning a HOLD rating to the stock
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D i s m a l p e r f o r m a n c e …
HEG reported its results for Q1FY12 that were lower than our estimates.
Revenues for the quarter stood at | 279.5 crore higher ~ 25.8% YoY but
lower ~0.7% QoQ (our estimate: | 308.3 crore). The performance during
the quarter under review was impacted on account of one-off process
loss in graphite electrodes segment. The volume loss for the same was
~4-5% while the impact was to the tune of ~ | 10 crore. Furthermore, the
thermal plants operated below par on account of maintenance shutdown.
Operating margins were also under pressure on account of higher costs
of furnace oil and LDO. As a result, the EBITDA margin contracted ~ 990
bps YoY and ~480 bps QoQ. EBITDA stood at | 44.1 crore (lower 22.7%
YoY and 24.1% QoQ) (our estimate: | 59.5 crore). The ensuing PAT stood
at | 19.8 crore (our estimate: | 31.2 crore) lower by 25.5% YoY and
42.5% QoQ.
ƒ Capacity expansion well on schedule
Phase I of capacity expansion from 66,000 tonnes per annum (TPA)
to 80,000 TPA is now operational and the full capacity commercial
production is expected to be operational by Q3FY12. An investment
of approximately | 275 crore had been earmarked for the expansion.
Total expansion capex is being funded through a mix of debt and
internal accruals.
V a l u a t i o n
At the CMP of | 226, the stock is trading at FY13E P/E of 7.7x and FY13E
EV/EBITDA of 5.9x. We have valued the stock at a 20% discount to the
global average of 6.8x CY12E EV/EBITDA, thus arriving at a target price of
| 219. We are assigning a HOLD rating to the stock
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