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Healthy operational performance….

Graphite India (GIL) reported an operationally healthy set of Q4FY21 numbers, especially for the standalone entity. For Q4FY21, standalone operations reported capacity utilisation of 85% compared to 78% in Q3FY21, 49% in Q4FY20.

Standalone operations reported topline of | 563 crore, up 24% QoQ, 3% YoY. EBITDA of standalone operations was at | 128 crore, while adjusted standalone EBITDA (EBITDA excluding onetime income and expense) was at | 188 crore. Standalone PAT was at | 114 crore (up 356% YoY, 23% QoQ). For Q4FY21, consolidated operations reported capacity utilisation of 73% compared to 65% in Q3FY21 and 41% in Q4FY20.

Consolidated operations reported topline of | 565 crore, up 13% QoQ, down 6% YoY. EBITDA of consolidated operations was at | 78 crore while adjusted consolidated EBITDA was at | 138 crore. Consolidated PAT for the quarter was at | 64 crore (up 178% YoY).

Healthy performance from graphite, carbon segment

During the quarter, graphite and carbon segment reported healthy performance both for the standalone and the consolidated entity. For the consolidated entity, in Q4FY21 graphite and carbon segment reported positive EBIT of | 169 crore compared to negative EBIT of | 30 crore in Q4FY20 and negative EBIT of | 1 crore in Q3FY21. For the standalone entity, during Q4FY21 graphite and carbon segment reported EBIT of | 216 crore compared to EBIT of | 22 crore in Q4FY20 and EBIT of | 69 crore in Q3FY21.

On strong footing…

The gradual pick-up in demand from steel consuming sectors in H2FY21 has led to increase in demand for steel and electrode. In Q4FY21, world crude steel production excluding China registered growth of 3.6% YoY and 2.9% QoQ. During Q4FY21, Indian crude steel production continued its healthy momentum growing 10.4% YoY and 5.3% QoQ. The recent step by China to abolish rebate of 13% VAT on certain steel exports to reduce steel production and exports, augurs well for graphite electrode sector. The lower exports from China may bode well for other EAF steel producing nations, thereby likely to have a positive rub-off on graphite electrode demand.

Valuation & Outlook

During Q4FY21, electrode prices started to recover from the lows. Furthermore, with increased steel production around the world, demand for electrodes has started to pick up and prices have started to stabilise. This augurs well for Graphite India, which is the largest Indian producer of graphite electrode. We value the stock at 6.5x FY23E EV/EBITDA and arrive at a target price of | 800 (earlier | 825). We maintain our BUY recommendation on the stock.

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