Shares of HEG Ltd., a prominent graphite electrode manufacturer, witnessed an 80.12% drop in early trade on Friday, opening at ₹511 apiece against a previous close of ₹2,570.80.
While the sharp fall initially surprised some investors, the decline was attributed to the company’s 5:1 stock split.
HEG reduced the face value of its shares from ₹10 to ₹2, adjusting the stock price accordingly.
Stock split adjusts price but maintains market value
The stock split has realigned the per-share value, with no impact on HEG’s market capitalization.
Such splits are typically implemented to enhance liquidity and make shares more accessible to retail investors by lowering individual share prices.
HEG, based in India, operates one of the largest integrated graphite electrode plants globally and processes Ultra High Power (UHP) electrodes.
The company exports more than 70% of its production to over 30 countries, making it a key player in the global graphite electrode market.
HEG’s fundamentals remain strong, says Jefferies
Global brokerage firm Jefferies had issued a ‘buy’ recommendation for HEG earlier this year, underlining the company’s solid financial position and growth potential.
According to Jefferies, HEG recently expanded its electrode capacity by 20,000 metric tonnes (mt), which became operational in November 2023, bringing the total installed capacity to 100,000 mt.
Jefferies highlighted HEG’s robust balance sheet with minimal debt and significant cash reserves, positioning the company well for future growth.
The firm valued HEG at an EV/EBITDA multiple of 7 times, slightly below the stock’s historical 10-year average.
Forecasts for graphite electrode and needle coke prices
Jefferies’ analysis projects steady demand for graphite electrodes in the coming years, with average selling prices expected to reach $4,900 per mt in FY25 and $5,500 per mt in both FY26 and FY27.
The brokerage also forecasted needle coke, a key input in electrode production, to maintain an average price of $2,000 per mt over the same period.
Jefferies anticipates HEG’s operating margins to bottom out at 14.4% in FY25 before expanding to 34.6% by FY27, reflecting the company’s potential for sustained profitability as market conditions stabilize.
HEG’s bid to increase share liquidity
Following the stock split, HEG’s adjusted price reflects the company’s strategy to increase share liquidity while maintaining strong market fundamentals.
Investors are expected to monitor the company’s performance, especially given HEG’s reliance on international markets and evolving graphite electrode demand.
Despite the price adjustment, Jefferies’ outlook remains optimistic, with the firm believing HEG is well-positioned for growth amid favorable market dynamics.
At 10:15 AM, HEG shares were trading at ₹511, reflecting stable demand for the stock post-split.
Market analysts predict that investor interest may strengthen as the adjusted share price makes HEG more accessible to retail investors.
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