📌 At a Glance (Excerpt)
Once the poster boy of the graphite supercycle, Graphite India is now trying to rediscover itself between power cuts, dumping duty drama, and random “other income” spikes. With revenue down 20% in five years, but ₹438 Cr ‘other income’ saving the FY25 party — is this a comeback or a cleverly disguised pension fund?
1️⃣ Flashback: From 🔥 to 🤕 in 3 Years
Graphite India was the multibagger of 2017-18. China shut down polluting electrode plants, global supply collapsed, and prices shot through the furnace.
- FY18 Revenue: ₹3,266 Cr → FY19: ₹7,858 Cr 📈
- EBITDA margin: 64% 🤯
- Net Profit: ₹3,396 Cr
- EPS: ₹173.8
- ROE: 75%+
- Stock went 10x in 18 months
But that was the high-voltage dream.
Reality check since FY20? Electrode prices normalized, demand stagnated, anti-dumping protection vanished, and the company started coasting on legacy cash.
2️⃣ Financials: Holding On to Carbon… and Cash
Here’s how it’s gone since the peak:
| 🔢 Metric | FY20 | FY25 | CAGR |
|---|---|---|---|
| Revenue (₹ Cr) | 3,094 | 2,560 | -3.72% |
| EBITDA (₹ Cr) | -86 | 254 | NA (loss to profit) |
| Net Profit (₹ Cr) | 45 | 458 | 56% (blame “other income”) |
| EPS (₹) | 2.3 | 23.6 | 59% (optical) |
| ROE (%) | 1% | 8% | Low single digit |
| Dividend Payout | 87% | 46% | Still generous |
| Working Capital Days | 216 | 539 | Houston, we have a hoarding problem |
🧮 Key Trend?
Graphite India makes electrodes… and increasingly, makes more money not making electrodes.
3️⃣ What is Driving This Company Now?
Let’s deconstruct this cooked carbon casserole:
🧱 Core Business: Graphite Electrodes
- Price per tonne crashed from $12,000+ to $3,000
- Steel cycle is recovering, but demand isn’t consistent
- FY25 revenue still below FY20
📉 Sales down. Margins up (but artificially). OPM at 10%, but fluctuates.
💰 Other Income Heroics: ₹438 Cr in FY25
You read that right. ₹438 Cr other income saved the bottom line.
How?
- Investment gains
- Dividend from subs
- Asset revaluation?
Hard to say, because management disclosures are thinner than the graphite rods they sell.
📊 Without this, FY25 would be a lukewarm dud.
🏭 Capacity Utilization: 🧊 Cold Storage Vibes
- Capacity is underutilized
- Inventory days rose from 252 to 376
- Receivable days at 67 (meh)
- Payable days… low (only 84)
👎 Working capital cycle now at 359 days. The balance sheet is being used as a glorified warehouse.
4️⃣ Segment Comparison: Peers vs. Puff
| Company | P/E | ROCE | FY25 Sales | Dividend Yield |
|---|---|---|---|---|
| Graphite India | 23x | 10.2% | ₹2,560 Cr | 2.04% |
| HEG Ltd | 82x | 3.9% | ₹2,500 Cr | 0.9% |
| RHI Magnesita | 49x | 7.0% | ₹3,000 Cr | 0.5% |
| Vesuvius India | 42x | 25.5% | ₹2,000 Cr | 0.27% |
📌 Takeaway: Graphite India looks cheaper than HEG, but not cheaper than value.
5️⃣ FY25 Highlights: Optical Illusions and Real Problems
- 🎯 Revenue: ₹2,560 Cr (down 13%)
- 🔥 Operating Profit: ₹254 Cr (mostly Q1-Q2 recovery)
- 🧾 Net Profit: ₹458 Cr (thanks to ₹438 Cr “other” gift)
- 🧊 Free Cash Flow: Positive, but mostly due to no expansion
- 💣 Capex? Minimal. R&D? Meh. Debt? Low. Ambition? TBD.
6️⃣ Valuation: Time to Light the Rod or Not?
Current Metrics:
- CMP: ₹538
- P/E: 23x (optical, due to one-time income)
- P/B: 1.8x
- Dividend Yield: 2.04%
- ROE: 8%
Let’s remove the smoke and calculate:
Fair EPS (Core only) = ₹10–₹12
Apply reasonable P/E (15–18x):
🎯 EduInvesting FV Range = ₹150–₹220 (Core)
Now if we do believe in a supercycle redux in graphite electrodes (China shut down, steel boom, EV battery push, etc.), we could apply FY25 EPS of ₹23 and give a frothy 20x:
🎯 Hype-Adjusted FV: ₹400–₹460
But at ₹538? You’re paying upfront for the sequel of a movie that flopped last time.
7️⃣ Risks, Red Flags & Reality
- ⚠️ Working Capital Days = 539 – The company is essentially a storage facility.
- 📉 5-year Sales CAGR = -4% — Repeat: NEGATIVE.
- 🧢 ROCE still low at 10.2% despite all the cash and asset lightness.
- 🥸 Other Income Dependency – One bad investment year, and EPS crumbles.
🎬 Final Verdict: The “Passive Income Ltd” of Indian Industrials
Graphite India is no longer a growth story — it’s a sleepy, cash-rich, underutilized business with a wild history. It’s the PSU of the private sector — dividend-paying, risk-averse, yet oddly opaque.
Unless electrode prices spike globally again, it’s hard to see this breaking out. For now, ₹538 looks fully priced. Unless you’re betting on another graphite frenzy or just farming dividends, this feels more like a “hold-and-hope” than “grind-and-grow.”
✍️ Written by Prashant | 📅 June 20, 2025
Tags: Graphite India, HEG, graphite electrodes, industrial stocks, other income, working capital warning, cyclical stocks, Nifty 500, EduInvesting Recap
