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HEG - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 3.6
| Stock Code | HEG | Market Cap | 10,110 Cr. | Current Price | 523 ₹ | High / Low | 672 ₹ |
| Stock P/E | 42.2 | Book Value | 224 ₹ | Dividend Yield | 0.34 % | ROCE | 5.19 % |
| ROE | 3.40 % | Face Value | 2.00 ₹ | DMA 50 | 555 ₹ | DMA 200 | 519 ₹ |
| Chg in FII Hold | 0.55 % | Chg in DII Hold | 0.16 % | PAT Qtr | 131 Cr. | PAT Prev Qtr | 71.8 Cr. |
| RSI | 39.7 | MACD | -6.11 | Volume | 6,01,330 | Avg Vol 1Wk | 11,77,184 |
| Low price | 331 ₹ | High price | 672 ₹ | PEG Ratio | -1.46 | Debt to equity | 0.15 |
| 52w Index | 56.3 % | Qtr Profit Var | 111 % | EPS | 12.4 ₹ | Industry PE | 38.4 |
📊 Core Financials
- Revenue & Profit Growth: Quarterly PAT rose from 71.8 Cr. to 131 Cr., showing strong sequential growth with 111% YoY variation.
- Margins: ROE at 3.40% and ROCE at 5.19% reflect weak profitability compared to industry peers.
- Debt Ratios: Debt-to-equity at 0.15 indicates low leverage, providing financial stability.
- Cash Flows: Cash generation supported by electrode manufacturing, though cyclical demand impacts consistency.
- Return Metrics: EPS at 12.4 ₹ is modest relative to current valuation.
💹 Valuation Indicators
- P/E Ratio: 42.2, slightly above industry PE of 38.4, suggesting mild overvaluation.
- P/B Ratio: ~2.3 (Current Price / Book Value), reasonable for the sector.
- PEG Ratio: -1.46, distorted due to uneven earnings growth, signaling caution.
- Intrinsic Value: Current price (523 ₹) is near fair value; upside potential depends on recovery in steel sector demand.
🏢 Business Model & Competitive Advantage
- Operates in graphite electrode manufacturing, catering to steel and alloy industries.
- Competitive advantage lies in established market presence and global customer base.
- Business model is cyclical, heavily dependent on steel demand and global commodity prices.
📈 Entry Zone & Long-Term Guidance
- Entry Zone: Attractive accumulation range between 500 ₹ – 515 ₹ (near DMA 200).
- Long-Term Holding: Suitable for investors with moderate risk appetite; long-term returns depend on steel demand recovery and margin improvement.
Positive
- Debt-light balance sheet with debt-to-equity at 0.15.
- Strong quarterly PAT growth of 111%.
- Institutional inflows (FII +0.55%, DII +0.16%) show investor confidence.
Limitation
- Weak profitability metrics (ROE 3.40%, ROCE 5.19%).
- PEG ratio signals poor growth-adjusted valuation.
- Dividend yield at 0.34% is negligible.
Company Negative News
- Weak technical indicators (RSI 39.7, MACD -6.11) reflect bearish momentum.
- Low trading volumes compared to weekly averages indicate reduced liquidity.
Company Positive News
- Quarterly PAT growth highlights operational improvement.
- Rising institutional inflows support investor sentiment.
Industry
- Graphite electrode industry is cyclical, driven by steel sector demand.
- Industry PE at 38.4 reflects fair valuations and moderate optimism.
Conclusion
- HEG shows fair valuation but weak profitability and cyclical risks.
- Debt-light structure and strong quarterly profit growth are positives, but margins remain under pressure.
- Best suited for investors with moderate risk appetite, with entry near support levels for better risk-reward.
I can also prepare a comparison with Graphite India to highlight HEG’s relative positioning in the electrode manufacturing sector.