Within minutes of opening, HEG hit the 20% UC at Rs.3871.05 and is the top gainer on the BSE. Graphite India too hit its 5% UC at Rs.829.20.
The graphite electrode sector has been having a spectacular run for the past few months as the industry seems to be on a fast track of growth and the outlook is extremely bullish. The run which began in 2017 is expected to sustain for a couple of years more as the demand is estimated to only rise. This optimism stems from China.
The country recently banned usage of induction furnaces and these are expected to be replaced by Electric Arc Furnaces (EAFs) and Ladle furnaces for steel making. And the biggest beneficiary of this are the graphite electrode makers as they are used extensively in EAFs. An additional demand of 2,75,000 mmt, up from 52 mmt in 2016 is expected to keep the graphite electrode makers really super busy.
Based on this, many foreign brokerages have initiated ‘buy’ on the stock. First it was Macquire which had put out an ‘Outperform’ for both Graphite as well as HEG. In its report, Macquire has said that the uptick in demand for graphite electrodes is not just a tick, one-time thing but marks a structural shift upwards. It expects price of electrode and needle coke to remain firm and stay strong for three years at least. Indian electrode makers have 22% global market share, which is no small fry! Macquire has given Graphite India a price target of Rs.1260 and HEG of Rs.4810.
And today morning we see another such bullish report from BofAML. For HEG, it has initiated a ‘Buy’ with a price target of Rs 6,700 and for Graphite, it has a ‘Buy’ with a price target of Rs 1,550.