Would you buy HEG LTD ? Q3FY20 quarterly results impact

LNJ Bhilwara Group

Would you buy HEG LTD ? Q3FY20 quarterly results impact

HEG (Hindustan Electro Graphite) LTD is a part of the LNJ Bhilwara Group and one of the Leading manufacturer of Graphite Electrode in India. The Company exports more than 70 Percent of its production to more than 30 Countries across the world, as per the Official website.

The LNJ Bhilwara Group had more than 50 years of industrial experience in various sectors. The Founder of the company had started his first textile mill in the year of 1961. Then came out with the evolution in Energy, IT Services, Medical, Textiles and Graphite Electrodes.

The Company’s revenue for the FY2018-19 was Rs. 6,591 Crore and the Net Profit was said to be Rs. 3,026 Crore. Currently the Market Capitalization for HEG LTD is around Rs. 4,000 Crore. The Book value stood at Rs. 1,038 and the Current Market Price is near to the said book value. The Debt to Equity ratio is 0.16 which is not bad for the investors.

The Interest Coverage Ratio (ICR) is 40 times. Promoters holding stood at 60 Percent and there is no pledging of shares on Promoters holding. During the FY2019, the debtor days have improved to 66 days. There is good dividend yield in this stock, but the recent quarters were not good due to Global Factors like Sino-US Trade war, Coronavirus, recent changes on Global Commodities.

The Stock price has fallen more than 50 Percent in the past one year. At the same time, the stock price had much appreciated between 2017-19, it almost went by 80 Percent. The Company’s revenue was also grown 36 Percent and 98 Percent in profits in the last five years.

HEG LTD fair value 2020

The Return on Equity(ROE) and the Return on Capital Employed(ROCE) were seems good in the past few years. But the Global Economic factors affect the Company’s earnings regularly these days. As per the Q3FY20 – quarterly results data, the Sales is said to be Rs. 394 Crore and the Expenses at Rs. 389 Crore. There is a net loss of Rs. 1 Crore in the Third quarter of this fiscal year.

As per the recent quarter results, the Stock Price is worth about Rs. 710 Per Share. But, it is currently trading more than Rs. 1,000 per Share. However the Stock price is still undervalued by the analysis of 2018-19 Fiscal Results report. The Net worth is also increasing significantly in the past three years. 

Influenced by the Cyclical and other Global factors, one can follow this stock based on Fundamental Analysis – Value Investing. This is not the stock that can be bought all the time, still the Valuation is there. One can look out the best price when the sharp correction would happen. We have to wait for another quarterly result and it will give a complete financial report – FY2019-20.

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