GRAPHITE INDIA LTD - INVESTOR PRESENTATION - Q2 FY 19 -RESULTS

GRAPHITE INDIA LTD

INVESTOR PRESENTATION

Q2 FY 19 RESULTS

ANNUAL REPORT 2017-18

Graphite india	Sep '18	Jun '18	Mar '18	Dec '17	Sep '17	YOY	QOQ
Net Sales	2,345	1,965	1,323	1,025	528	344.13	19.34
Consumption of Raw Materials	504	380	271	189.54	166	203.61	32.63
P/L Before Tax	1,668	1,451	741	538	149	1019.5	14.96
Tax	555	494	201	178.99	46	1106.5	12.35
Net Profit	1,113	957	540	359	103	980.58	16.3
Equity	39	39	39	39	39	0	0
Basic EPS	56.87	49.08	27.69	--	5.25	983.24	15.87
MP	995
PE RATIO	4.37
VOLUME	550000
52W L H	531	1126
FV	2
09.11.18	1 week	2 week	1 month	3 month	6 month	9 month	1 year
Price	976.5	942.6	789.75	1094.7	775.75	713.4	597.05
Gain / Loss	1.87%	5.54%	25.9%	-9.13%	28.2%	39.4%	66.6%

GRAPHITE INDIA-ANNUAL : 2017-18

Revenue from operations increased by 114% to Rs. 2,983 cr for FY 2017-18 as against Rs. 1,392 cr in the previous year. The increase was primarily driven by higher Sales Price realization and sales volume

The continued, consistent slide in the selling prices witnessed during last few years reversed midway during the current year with better balancing of demand-supply imbalance.

The global demand for graphite electrodes was strong due to –

(1) demand revival in some of the steel producing nations with higher EAF capacities;

(2) consolidation in electrode industry which saw approximately 2,00,000 tons of capacity being shut down and

(3) Closure Of Significant Steel Capacities in highly polluting induction furnaces and blast furnaces in China and replaced by environment friendly electric arc furnaces.

(4)China also closed down some of its electrode manufacturing capacities.

Graphite and Carbon Segment accounts for about 95% of the total revenue.

OVERSEAS SUBSIDIARIES

The performance of  German subsidiaries has turned around and shown sharp improvement during the year with recovery in electrode demand as well as prices during the year.

MANAGEMENT DISCUSSION AND ANALYSIS

Graphite Electrode is used in electric arc furnace based steel mills for conducting current that melts scrap iron and steel and is a consumable item for the steel industry. The principal manufacturers are based in USA, Europe, India, China, Malaysia and Japan.

The two basic methods for steel production are - (1) Blast Furnace (BF); and (2) Electric Arc Furnace (EAF).

Calcined Petroleum Coke and Paste

The Coke Division in Barauni, Bihar, is engaged in  manufacturing Calcined Petroleum Coke (CPC), Carbon Paste and Electrically Calcined Anthracite Paste. It is one of the several backward integration initiatives of the Company. 

CPC is primarily used in manufacture of anodes for use in aluminium smelters, manufacture of graphite electrodes and also used as carburiser in steel. The division also manufactures four grades of Paste .

This division’s performance was better due to higher

Realization. Supply constraints in raw material i.e. Green / Raw Petroleum Coke was the major hurdle faced during the year.

The impervous graphite equipment Division is engaged in design, manufacture and supply of Impervious Graphite heat and mass transfer equipment and turnkey systems.

Impervious  graphite  is  an  ideal  material  of  construction  in   industries   like   Chloro-Alkali,   Chlorinated   Organic   Metal  Processing,  Polymers  like  VCM,  Polycarbonate  and  Caprolactum, Drug Intermediates, etc.

Power  constitutes  one  of  the  major  costs  of  Electrode  production.  For  captive  consumption,  the  Company  has  an  installed  capacity  of  18  MW  of  power  generation  through Hydel  route.

Opportunities and threats

India  was  the  third  largest  steel  producer  in  2017.  India’s steel exports grew 102% YOY to 8.24 milliion tons in 2016-2017, while steel imports declined 37% year-on-year to 7.4 million tons. l

India is expected to become the  second  largest  steel  producer  in  the  world  by  2018,  based  on increased capacity addition in anticipation of upcoming demand. Moreover Government of India’s focus on  infrastructure  and  restarting  road  projects  is  further  boosting  demand  for  steel.  Also,  further  likely  acceleration  in rural economy and infrastructure is expected to increase the demand for steel.

Outlook

World  crude  steel  production  reached  1,691.2  million  tons for  the  year  2017,  up  by  5.3%  compared  to  2016.  The year 2018 and 2019 is expected to see a continuation of cyclical upturn in steel demand with a continuing. The graphite  electrode  industry  has  historically  followed  the 

growth of EAF steel industry and, to a lesser extent, the steel  industry  as  a  whole,  which  has  been  highly  cyclical .

Risks and Concerns

cyclical nature of the steel demand / production through EAF route as also to  the  risks  arising  from  the  volatility  in  the  cost  of  input materials.

General  economic  conditions. 

Excess production capacity may result in manufacturers producing and  exporting  electrodes  at  prices  that  are  lower  than  prevailing domestic prices, and sometimes at or below their cost of production.

Petroleum needle coke is the primary raw material used in the  production  of  graphite  electrodes.  Supply  of  petroleum  needle coke has been limited starting in the second half of 2017 as the demand has outpaced supply due to increasing demand  for  production  of  lithium-ion  batteries  used  in  electric vehicles. Similarly the availability and price of other materials may impact the operations and/or margins of the Company.

Disproportionate increase in taxes and other levies imposed periodically by the Central and State Governments