Mehabe score: 3 G Factor: 3 Piotski Score: 4 The stock has a rating SELL. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 3 and Piotski score of 4.
Description
HEG Ltd is India’s leading graphite electrode
manufacturer. It has one of the largest integrated Graphite Electrode plants in the world, processing sophisticated UHP (Ultra High Power) Electrodes. It is the premier company of the LNJ Bhilwara group. [1]Site:HEGMain Symbol:HEG
Stock trades at 2190.0, below its 50dma 2231.59. However it is trading above its 200dma 1871.72. The stock remains weak in the short term due to near term bearish momentum. However overall bullish structure remains intact. Price action will further build up as it moves above its dma50, currently situated at 2231.59.
The 52 week high is at 2580.00 and the 52week low is at 659.00
Price Chart
P/E Chart
Sales and Margin
Strengths
– has reduced debt.
– is almost debt free.
– has a good return on equity (ROE) track record: 3 Years ROE 29.15%
– has been maintaining a healthy dividend payout of 29.45%
Weakness
– The company has delivered a poor sales growth of 7.60% over past five years.
-Earnings include an other income of Rs.88.93 Cr.
Competition
– The industry trades at a mean P/E of 138.9x. HEG trades at the industry’s max P/E of 344.65x. HEG trades at a P/E of 345.0x
– Industry’s mean G-Factor is 4.3 while the mean Piotski score is 7.0. HEG has a G-Factor of 3 and Piotski scoreof 4.
– Average 1 month return for industry is -0.9%. The max 1- month return was given by Panasonic Carbon: a return of 0.13 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 414.0 cr compared to Rs 233.0 cr for period ended Jun 2020, a rise of 77.7%
Company reported operating profit of Rs 72.0 cr for period ended Jun 2021, operating profit margin at 17.4 %.
Operating profit was negative for the same period last year thus company has improved its margins this year
The EPS for Jun 2021 was Rs 14.71 compared to Rs -4.17 for previous quarter ended Mar 2021 and Rs 3.71 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 1437.0 cr for period ended TTM vis-vis sales of Rs 1254.0 cr for the period ended Mar 2021, a healthy growth of 12.7%. The 3 year sales cagr stood at -39.8%.
Operating margins expanded to 2.0% for period ended TTM vis-vis -4.0% for period ended Mar 2021, expansion of 600.0 bps.
Net Profit reported at Rs 25.0 cr for period ended TTM vis-vis sales of Rs -18.0 cr for the period ended Mar 2021, rising 172.0%.
Company reported a poor Net Profit CAGR of -79.8% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has worsened on its Return on Equity (RoE) metric. The RoE on Last Year basis was -2.0% compared to 29.0% over the last 3 Years. – The stock has given a return of 186% on a 1 Year basis vis-vis a return of -15% over the last 3 Years. – The compounded sales growth on a TTM bassis is -8% vis-vis a compounded sales growth of -23% over the last 3 Years. – The compounded profit growth on a TTM basis is 115% vis-vis a compounded profit growth of % over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 11.27% vis-vis 9.43% for Mar 2021 – Public shareholding has remained largely constant. The Jun 2021 public holding stood at 21.62% vis-vis 23.54% for Mar 2021
Conclusion
– has reduced debt.
– is almost debt free.
– has a good return on equity (ROE) track record: 3 Years ROE 29.15%
– has been maintaining a healthy dividend payout of 29.45% – The company has delivered a poor sales growth of 7.60% over past five years.
-Earnings include an other income of Rs.88.93 Cr.
Fundamentally, the stock remains weak. The business fundamentals are on shaky ground. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock reflects the poor fundamentals. The stock remains below its 50 DMA 2231.59 and is trading at 2190.0. It has shown near term lack of bullish momentum. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
