GRAPHITE - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 3.4

📊 Core Financials

• Revenue & Profit Growth: Quarterly PAT declined from 145 Cr. to 92 Cr. (↓ 36.6%), YoY profit variation at -49.4% shows earnings pressure.
• Margins: ROCE at 10.3% and ROE at 8.26% are modest, reflecting average efficiency.
• Debt Ratios: Debt-to-equity at 0.03 indicates negligible leverage, strong balance sheet stability.
• Cash Flows: Dividend yield at 1.98% provides shareholder returns, supported by low debt and stable cash flows.

💹 Valuation Indicators

• P/E Ratio: 35.6, slightly below industry PE of 39.0, suggesting fair valuation.
• P/B Ratio: Current Price / Book Value ≈ 1.9, reasonable compared to peers.
• PEG Ratio: -4.63, distorted due to declining earnings, limiting valuation reliability.
• Intrinsic Value: Based on EPS (₹15.5) and industry PE, fair value ≈ ₹600–610, close to current price.

🏢 Business Model & Competitive Advantage

• Graphite India operates in graphite electrodes, catering to steel and industrial sectors.
• Competitive advantage lies in established market presence and low debt structure.
• However, profitability is cyclical and tied to steel demand and global commodity prices.

📈 Entry Zone & Holding Guidance

• Entry Zone: Attractive between ₹500–540, near DMA200 support (₹542).
• Long-Term Holding: Suitable for cyclical exposure to steel sector, but earnings volatility requires cautious holding.

✅ Positive

• Low debt-to-equity ratio (0.03), strong financial stability.
• Dividend yield at 1.98% provides income support.
• FII holdings increased (+1.61%), showing foreign investor confidence.

⚠️ Limitation

• Quarterly PAT declined (↓ 36.6%), YoY profit variation at -49.4%.
• ROCE (10.3%) and ROE (8.26%) are modest.
• PEG ratio negative (-4.63), valuation distorted by weak earnings growth.

📉 Company Negative News

• DII holdings reduced (-0.51%), showing declining domestic institutional confidence.
• Profitability under pressure due to weak demand and cyclical industry trends.

📢 Company Positive News

• FII holdings increased (+1.61%), reflecting foreign investor support.
• Strong balance sheet with negligible debt.

🏭 Industry

• Industry PE at 39.0, slightly above company’s valuation.
• Graphite electrode demand tied to steel production cycles.
• Sector remains cyclical, influenced by global commodity and energy prices.

🔎 Conclusion

• Graphite India shows financial stability with low debt and fair valuation.
• However, earnings volatility and modest return ratios limit upside potential.
• Entry recommended near ₹500–540; long-term hold viable for cyclical exposure but with caution.