India Ratings affirms HEG at 'IND AA-'/Stable

India Ratings and Research (Ind-Ra) has affirmed HEG Limited's Long-Term Issuer Rating at 'IND AA-'. The Outlook is Stable.

The affirmation reflects HEG's strong finance profile, led by strong on-balance sheet liquidity resulting in it being a net cash entity. The company's business profile is strengthened by the oligopolistic nature of the industry, low production cost advantages enjoyed by HEG on account of its single-location plant, labour cost advantages, etc. The ratings, however, are constrained by the company's limited product diversification.

The Stable Outlook reflects Ind-Ra's expectation of an improvement in demand and the resultant pick up in the prices of graphite electrode (GE) in FY22, causing a reversal in the sharp compression in the spreads between GE prices and its raw material needle coke (NC) prices as witnessed over FY20 and FY21. Further, with most of the high-cost NC being consumed and with its prices on the rise, Ind-Ra believes the inventory-valuation losses are unlikely in FY22 and would help bolster operational EBITDA and cash flows over FY22. The company is still carrying out a large capacity-increasing capex, which has the potential to lower the liquidity available on the balance sheet and the management expects the same to come onstream by FYE23. The management also expects the reduction in liquidity, on account of the capex, to get offset by higher operational EBITDA and resultant operational cash flows in FY22.

Shares of HEG LTD. was last trading in BSE at Rs.2230 as compared to the previous close of Rs. 2261.2. The total number of shares traded during the day was 6946 in over 1360 trades.

The stock hit an intraday high of Rs. 2280.05 and intraday low of 2225.05. The net turnover during the day was Rs. 15571794.

Source : Equity Bulls

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