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We hosted Graphite India Chairman K K Bangur for a non-deal roadshow (NDR), meeting various investors to discuss recent developments in the graphite electrode (GE) industry. The management remains cautious on the recently announced GE price hikes, with actual implementation and contracted volumes yet to be seen, while GrafTech’s 51kt capacity exit is structurally positive for industry supply-demand. GRIL expects further cost reductions in FY28, led by lower power/fuel costs, furnace upgrades, and efficiency initiatives. Advanced materials and defense businesses offer attractive high-margin growth opportunities, while the anode project remains a key long-term optionality, with pilot production and customer approvals underway. Overall, we believe near-term earnings upside is driven by GE pricing and cost savings, while anode and advanced materials provide longer-term growth potential. We increase our TP by ~17% to Rs1,050 from Rs900; maintain BUY.

Cautious on price hike announcements; GrafTech’s capacity exit positive

We hosted GRIL’s Chairman for an NDR, meeting various investors, and discussed recent developments, including the announced price hikes and GrafTech’s capacity rationalization. The management remains cautious on the recently announced price hikes, highlighting that these are announcements rather than confirmations, with contracted volumes yet to be established. Hence, it believes actual market actions and realized prices will be more important than announcements. The closure of GrafTech’s 51kt Mexico capacity was a positive surprise for the industry, given that Mexico was reportedly one of its lowest-cost production locations and could supply the US without tariffs. The management believes the capacity exit is structurally positive for the remaining GE players. GRIL exports 1/3rd of its production, although pricing is largely on a delivered basis, making freight inflation a cost headwind. With China facing a 103% CVD and ADD proceedings expected to progress in the coming weeks, the management believes any ADD on GRIL is likely to be minimal, potentially 0-5%, which it can absorb

Further cost reduction to support FY28 margins

On the cost side, the management remains confident of further operating leverage, with the second phase of cost-reduction initiatives expected to be larger than the first. Older furnaces are being migrated to newer, more efficient furnaces. Power consumption at the Durgapur plant has been reduced to ~3,500 units/t of GE, with further improvement expected through renewable power investments. The management expects operating costs to decline further in FY28 and believes power and fuel costs should trend lower, supporting margins. It also highlighted that its integrated manufacturing model, including in-house coke production for HP/RP grades, gives it a cost advantage; the management estimates GrafTech’s cost is $800-1,000/t higher than GRIL’s. Importantly, while Chinese producers have significant capacity and can produce good-quality electrodes, the management does not expect China to be disregarded as a competitive supply source. On the demand side, increasing adoption of EAFs in the US remains a key positive, with Europe expected to follow as geopolitical conditions normalize.

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