Buy Graphite India Ltd for the Target Rs 900 by Emkay Global Financial Services Ltd
GRIL reported a strong 1Q, with EBITDA of Rs1.4bn and margin of 17.1%, well above normalized levels, aided by better fixed-cost absorption; utilization remained robust at 97%. GrafTech’s commentary reinforces our constructive GE outlook, with improving EAF utilization, lower Chinese exports, stronger trade protection, and recent >15% price hikes pointing to an improving pricing environment; similar actions by Indian players could be a key earnings catalyst. Factoring in the 1Q beat and improving margin trajectory, we raise FY28-29E EBITDA by 7-8% and TP by ~6% to Rs900 (from Rs850); maintain BUY
1Q surprises on margin front
GRIL reported a strong 1Q, beating our estimates significantly, with EBITDA of Rs1.4bn vs loss of Rs1.4bn in 4QFY26 (impacted by FV loss on GrafTech’s investment). This can be mainly attributed to much better fixed-cost absorption, supporting better-thanexpected EBITDA margin at 17.1% during 1Q – much above its normalized margin level of 6-7% over past several quarters. Adjusted EBITDA/t stood at $781 vs $300 in 1QFY26. Revenue rose 3.2% qoq to Rs8.4bn vs Rs8.2bn in 4QFY26, despite flat realizations during the quarter, at $3,728/t. Capacity utilization remained elevated at 97% (vs 104% in 4Q), reflecting strong demand environment. PAT came in at Rs1.7bn vs loss of Rs1.0bn in 4QFY26, supported by treasury income of Rs1.0bn despite being impacted by volatility in financial markets arising from geopolitical challenges. From the balance sheet perspective, the capital structure remains robust. GRIL has net cash balance of Rs39.4bn as of the end of Jun-26.
Positive readthrough from GrafTech’s commentary
GrafTech’s 2QCY26 commentary reinforces our constructive outlook on the graphite electrode (GE) cycle, with the industry approaching a potential inflection point amid improving ex-China steel production, rising EAF utilization, lower Chinese exports (down 5.6%), and stronger trade protection. Pricing momentum is gaining traction, with >90% of CY26 volumes contracted and recent customer commitments averaging >15% above pre-hike levels, providing a stronger base for CY27 negotiations. Rising needle-coke costs and Middle East-led feedstock tightness should further support GE price restoration, with GrafTech indicating additional pricing actions ahead. We believe the improving pricing environment increases the likelihood of Indian players emulating the same – this could emerge as the key catalyst for an earnings re-rating, in our view.
Positive thesis validated; maintain BUY
We expect a gradual recovery in GE utilization and realizations across key markets, considering i) steel price hikes announced at the start of CY26 across the US, Europe, and India; ii) improving EAF utilization levels in the US and Europe; and iii) recent GE price hikes by GrafTech and Tokai Carbon. Baking in 1Q numbers and improved margin trajectory, we raise our FY28-29E EBITDA by 7-8%, resulting in a ~6% increase in our TP to Rs900 from Rs850; maintain BUY.
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