Graphite India Ltd - Q4 FY20 Results
Total income from operations 602 Cr
1,693 Cr (-64.46%) YoY | 643 Cr (-6.32%) QoQ
Year ending revenue: 3,094 Cr Vs. 7,858 Cr (-60.61%)
Net Profit of (7) Cr
562 Cr (-101.27%) YoY (353) Cr (101.83%) QoQ
Year ending Net profit: 45 Cr Vs. 3,396 Cr (-98.61%)
EPS (in Rs.) (0.37)
28.74 YoY | (18.08) QoQ
Year ending EPS: 2.30 Vs. 173.80
View: Result is below expectation and continuously declined. YoY revenue significantly declined and company also posted also. However since comparison from QoQ revenue slightly declined but losses significantly reduced.
Business Updates & Highlights
Q4FY20 EBITDA is around INR (3) Cr Vs. 934 Cr in Q4FY19 Vs. (445) Cr therefore declined by 100.7% in YoY and 99% in QoQ. EBITDA margin is (0%) Vs. 55% in Q4FY19.
FY20 EBITDA to Rs. 95 Crores Vs. 5,233 Cr in FY19 therefore declined by 98% in YoY. EBITDA margin of 3% Vs. 67% in FY19.
Key business updates
Due to steep fall in electrode prices, Inventory has been recognized on Net Realizable Value as per Ind AS, resulting in a fair value adjustment of carrying inventory. FY2020 – Rs. 584 Crores write down. Q4 FY2020 – Reversal of Rs. 61 Crores out of the write down of Rs. 490 Cores in Q3 FY2020.
In Q3 FY2020 - The Company has recognized loss of Rs. 39 crores as per the Insolvency Resolution process, towards sales made to one of its customers in earlier period
The capacity utilization during the year was 55% as compared to 86% in FY2019.
Financial
ROE and ROCE is around 8% and 18% respectively and book value per share is around INR 180 and share is currently trading at 1.2x of its book value. Company is currently trading at annualized PE of around 101 which is too expensive as per Industry benchmark. Promoter holding is around 65.2% in the company which is stable and fair. FIIs and insurance cos hold around 9% and 3.5% in the company. Cash and cash equivalent from operating activities as of March 2020 is around INR 171 Cr Vs. 1,770 Cr as of March 2019. Debt as of March 20 is around INR 416 Cr and cash & cash equivalent as of March 20 is around 2,008 Cr.
Position: Share strong support price is INR 180. Book and exit based on your risk appetite.
Share View: Share price high 427 (52 week) and now 203 almost 50% corrected from their peak. Graphite India is the largest Indian producer of graphite electrodes and one of the largest globally, by total capacity. Its manufacturing capacity of 98,000 tonnes per annum is spread over three plants at Durgapur and Nashik in India and Nurnberg in Germany. Graphite electrodes are used in electric arc furnace (“EAF”) based steel mills and is a consumable item for the steel industry. The graphite electrode industry is highly consolidated with the top five major global players accounting for almost 75% of the high end UHP electrode capacity.
Opportunities: Share is currently trading at 80% discount for their all-time high 1100 in 1.5 years back. Global slowdown in steel demand coupled with increased steel exports from China is expected to impact demand of electrodes. Electrode capacities have been ramped up in China. However, EAF capacities have not kept pace due to higher scrap cost and electricity cost thus creating an imbalance. Excess electrode volumes are being exported to other countries at cheaper rates
Risk: India removed anti dumping duties on graphite electrodes imported from China in September 2018 which has resulted in increased imports. Steel prices also continue to remain under pressure and combination of these factors have resulted in significant correction of electrode prices. Continuously deteriorated top line as well as bottom line on YoY and QoQ now Covid also further correct the company overall product demand.
Sources:
Various publications
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