GRAPHITE - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 3.4
| Stock Code | GRAPHITE | Market Cap | 12,457 Cr. | Current Price | 638 ₹ | High / Low | 685 ₹ |
| Stock P/E | 41.2 | Book Value | 287 ₹ | Dividend Yield | 1.73 % | ROCE | 10.3 % |
| ROE | 8.26 % | Face Value | 2.00 ₹ | DMA 50 | 605 ₹ | DMA 200 | 564 ₹ |
| Chg in FII Hold | -0.17 % | Chg in DII Hold | 0.44 % | PAT Qtr | 92.0 Cr. | PAT Prev Qtr | 145 Cr. |
| RSI | 54.2 | MACD | 6.08 | Volume | 7,33,449 | Avg Vol 1Wk | 12,05,542 |
| Low price | 366 ₹ | High price | 685 ₹ | PEG Ratio | -5.36 | Debt to equity | 0.03 |
| 52w Index | 85.2 % | Qtr Profit Var | -49.4 % | EPS | 15.5 ₹ | Industry PE | 36.3 |
📊 Analysis: Graphite India trades at a P/E of 41.2, which is higher than the industry PE of 36.3, indicating premium valuation. ROCE (10.3%) and ROE (8.26%) are modest, reflecting average capital efficiency. EPS of 15.5 ₹ supports earnings, but the PEG ratio (-5.36) highlights weak growth visibility. Debt-to-equity at 0.03 is very low, showing strong financial stability. Dividend yield of 1.73% provides moderate income. Quarterly PAT dropped sharply (92 Cr. vs 145 Cr.), with a -49.4% variation, raising concerns about earnings consistency. Technicals show support near DMA 200 (564 ₹) and consolidation around DMA 50 (605 ₹), with RSI at 54.2 indicating neutral momentum.
💰 Entry Price Zone: Ideal accumulation range is 560 ₹ – 590 ₹, close to DMA 200 (564 ₹) for margin of safety. Current price (638 ₹) is above this zone, so waiting for dips is advisable.
📈 Exit / Holding Strategy: For existing holders, maintain positions with a medium-term horizon (2–3 years). Partial profit booking can be considered near 675 ₹ – 685 ₹ (recent highs). Long-term holding beyond 3 years requires improvement in ROE/ROCE and earnings stability. Dividend yield provides modest income, but focus remains on capital appreciation.
✅ Positive
- Debt-free balance sheet (debt-to-equity 0.03)
- Dividend yield of 1.73% provides moderate income
- EPS of 15.5 ₹ supports valuation strength
- DII holdings increased (+0.44%)
- Strong 52-week performance (85.2% index)
⚠️ Limitation
- Weak ROE (8.26%) and ROCE (10.3%)
- PEG ratio (-5.36) indicates poor growth visibility
- P/E of 41.2 is premium compared to industry PE (36.3)
- Quarterly PAT dropped significantly (-49.4%)
📉 Company Negative News
- Decline in FII holdings (-0.17%)
- Sharp drop in quarterly PAT (92 Cr. vs 145 Cr.)
- Trading volume below weekly average, showing reduced momentum
📈 Company Positive News
- DII confidence increased (+0.44%)
- Debt-free status ensures financial stability
- Dividend yield supports investor confidence
🏭 Industry
- Graphite electrode industry is cyclical and linked to steel demand
- Industry PE at 36.3 highlights moderate valuation levels
- Sector rotation favors commodities during industrial upcycles
🔎 Conclusion
Graphite India is a financially stable stock with modest efficiency ratios and a fair dividend yield. However, earnings volatility and weak growth visibility limit its long-term attractiveness. Ideal strategy: accumulate near 560–590 ₹, hold for 2–3 years, and book partial profits near highs (675–685 ₹). Long-term compounding potential depends on improvement in profitability and sustained demand in the graphite electrode sector.