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Graphite India Ltd>
  • CMP : 396.5 Chg : -3.05 (-0.76%)
  • Target : 475.0 (9.95%)
  • Target Period : 12 Month

26 May 2022

Muted performance…

About The Stock

Graphite India (GIL) is the largest Indian producer of graphite electrodes by total capacity. Its manufacturing capacity of 98000 tonnes per annum is spread over three plants at Durgapur & Nashik in India & Nuremberg in Germany.

  • While GIL manufactures a full range of graphite electrodes, it stays focused on the higher margin, large diameter, ultra-high power (UHP) electrodes
  • GIL has over 40 years of technical expertise in the industry
Q4FY22 Results

GIL reported a subdued performance in Q4FY22. Muted performance from German operation impacted overall consolidated performance. German operations were impacted by sharp increase in electricity & gas prices.

  • For the quarter, GIL reported a standalone capacity utilisation of 92% compared to 85% in Q4FY21 and 99% in Q3FY22. Standalone topline for the quarter was at ₹ 767 crore, up 36% YoY but down 8% QoQ. Standalone reported EBITDA for the quarter was at ₹ 107 crore, down 16% YoY, 32% QoQ. Ensuing standalone PAT for the quarter was at ₹ 122 crore, up 7% YoY but down 21% QoQ
  • For the quarter, GIL reported consolidated capacity utilisation of 76% compared to 73% in Q4FY21 and 90% in Q3FY22 (our estimate of 92%). Consolidated topline for the quarter was at ₹ 844 crore, up 49% YoY but down 4% QoQ
  • Consolidated reported EBITDA for the quarter was at ₹ 88 crore, up 13% YoY but down 36% QoQ. Ensuing consolidated PAT for the quarter was at ₹ 95 crore, up 48% YoY but down 29% QoQ
What should Investors do?

GIL’s share price has given a return of ~137% over the last two years (from ~₹ 182 in May 2020 to ~₹ 432 levels in May 2022).

  • We downgrade the stock from BUY to HOLD
Target Price Valuation

 We value GIL at ₹ 475, 6x FY24E EV/EBITDA.

Key Triggers for future price performance
  • Going forward, electrode demand and prices are expected to stabilise but uncertainty surrounding key input & logistics costs continues to add pressure. Needle coke and other input costs are witnessing a rising trend
  • Over FY22-24E, we expect GIL’s consolidated topline to grow at 17% CAGR while consolidated EBITDA and consolidated PAT are expected to register a CAGR of 46% and 39%, respectively
New Stock Ideas

 In our metal coverage, we like Ratnamani Metals and Tubes.

  • Ratnamani Metals and Tubes (RMTL) is a niche player with superior capabilities in the industrial pipes and tubes segment
  • BUY with a target price of ₹ 2950

Key Financial Summary

(| Crore) FY19 FY20 FY21 FY22 CAGR in % (FY19-FY22) FY23E FY24E CAGR in % (FY22-FY24E)
Net Sales 7,858.0 3,094.0 1,958.0 3,026.0 16.0 3,737.4 4,159.9 17.2
EBITDA 5,023.0 -79.0 -205.0 475.0 64.0 671.5 1,008.6 45.7
EBITDA Margin (%) 63.9 -2.6 -10.5 15.7 - 18.0 24.2 -
Adj PAT 3,396.0 45.0 -32.0 505.0 48.0 716.3 931.9 35.8
EPS (|) 173.8 2.3 -1.6 25.8 - 36.7 47.7 -
EV/EBITDA (x) 1.2
RoCE (%) 87.0 -2.6 -5.4 7.8 - 10.6 15.5 -
RoE (%) 63.5 1.0 -0.7 10.2 - 10.9 15.9 -
- - - - - - - - -
Source: Company, ICICI Direct Research

Variance Analysis (Consolidated Performance)

Consolidated Performance Q4FY22 Q4FY22E Q4FY21 YoY (%) Q3FY22 QoQ (%)  
Revenue 844 1014 565 49% 880 -4% Consolidated topline came in lower than our estimate.
Other Income 71 72 56 27% 66 8%  
Total Operating expense 756 817 487 55% 743 2%  
Reported EBITDA 88 197 78 13% 137 -36% Consolidated EBITDA came in muted of the back of higher than expected operating costs.
EBITDA Margin (%) 10.4 19.4 13.8 (340) bps 15.6 (520) bps Consolidated EBITDA margin  came in muted of the back of higher than expected operating costs.
Depreciation 14 14 14 0% 14 0%  
Finance cost 2 2 1 100% 1 100%  
Share of loss of an associate -2 0 -3 -33% -3 -33%  
PBT 141 253 116 22% 185 -24%  
Tax Outgo 46 64 52 -12% 52 -12%  
PAT 95 189 64 48% 133 -29% Consolidated PAT came in lower than our estimate
Key Metrics              
Consolidated Capacity Utilisation (%) 76% 92% 73%   90%   Consolidated capacity utilisation came in lower than our estimate 

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