The graphite electrode industry is bracing for a challenging period ahead, according to Manish Gulati, Executive Director at HEG.

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HEG, a significant player in the sector, anticipates a tough few quarters. The company is preparing for subdued pricing, which is expected to impact its financial performance. Additionally, a dip in volume growth is foreseen in the financial year 2024, signalling a cautious approach amidst uncertain market conditions

“Two-four quarters we will have pressure on prices, there is much lower demand, although not much inventories in the system... there will be a slight dip in volume in this financial year compared to the last,” he said.

Gulati shared insights into the industry's recent performance, noting a decline in capacity utilization from nearly 90% in the first quarter to around 85% in the second. He anticipates this trend to continue, with a further decrease expected in the coming quarters

“Quarter two capacity utilisation was close to 85% and quarter one capacity utilization was close to 90% but going forward, the next few quarters are tough for the industry. We expect the October-December quarter to be close to 75%, likewise for January to March,” he mentioned.

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Among the key highlights of HEG's forward-looking strategy is the establishment of Li-Ion cell manufacturing capabilities. In an earlier interview, Gulati noted that HEG's foray into Li-Ion cell manufacturing is projected to start yielding revenues from the second half of the fiscal year 2025.

In June, InCred Equities initiated coverage of HEG with an 'add' rating and a target price of ₹2,462, over a 50% upside from the current price of around ₹1,584.

A note by InCred highlighted that HEG venturing into the production of anodes for lithium-ion batteries used in electric vehicles could serve as a substantial catalyst as the EV market shows significant growth potential in both India and worldwide.

HEG shares have underperformed over the past month. The scrip lost over 11% versus a flat Nifty 50.

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(Edited by : Shweta Mungre)