HEG(Hindustan Electro Graphite) Ltd – Is it Overvalued ?
Six months ago, we looked out the Fundamental Analysis of this Graphite Electrode company – HEG Ltd. we had written a post about would you buy this stock ? Now it crossed with two Quarterly results – Q1 and Q2 of FY20.
Global changes in the Graphite industry have also affected HEG’s Financial Position like Top line – Sales. The Stock price was at a discount rate compared to its Financial Statements two quarters ago. Is it still the same discount available now ?
At present, the Company’s Financial Statements are lower than the stock price. In the March 2019 Quarter, the Sales were stood at Rs. 1,347 Crore and the Net profit of Rs. 524 Crore was there.
For the Q1FY20 – June Quarter, the results are like – Sales of Rs. 817 Crore and the Net Profit of Rs. 234 Crore. The Q2FY20 – September Quarter came with the Sales of Rs. 564 Crore and the Net profit stood at Rs. 179 Crore. The Q2FY20 profit comes due to the Tax Cuts.
As we compared the Q1 and Q2 of FY20 with the earlier FY19, the Top line and Bottom line were not good. Due to the weakening of Global Factor and Domestic Slow down, we cannot expect much earning in the said season.
The Earning Per Share were also fell down from Rs. 131 which is in March 2019 to Rs. 46 in September 2019. The Reserves are improved with Rs. 3,861 Crore in the end of September Quarter – Q2FY20.
Currently the Stock’s Fair Price is below Rs. 850 based on Discounted Cash Flow. But, the current market price is trading above Rs. 1,000. As comparing with the Sector, the Price to Earning is good. But the Price to book value is increasing, as it is not good for the Investors.
However, the Debt to Equity ratio is below 0.5 and the ICR (Interest Coverage Ratio) is 93 times – both are giving positive information. The Debtor days have also improved from 116 Days to 66 Days.
The ROCE is 143 Percent and the Return on Equity (ROE) at 109 Percent. Kindly Note that the Face value of HEG Ltd is at Rs. 10. The Current Liabilities and Current Assets are Rs. 1,233 Crore and Rs. 3,203 Crore respectively.
We should look at the next 2 – 3 Quarterly results. At the same time, the stock price of HEG LTD should be made available to us at a discounted rate.
Kindly share your views / comments with a smile 🙂