HEG Ltd Q2FY26 – From Arc to Anode, the Graphite Godfather’s ₹699 Cr Quarter Ignites a Spark (with ₹143 Cr Profit up 74%)
1. At a Glance
There are companies that make steel, and then there’s the one that quietly fuels their furnaces — HEG Ltd, the desi graphite electrode godfather from the LNJ Bhilwara Group. As of Q2FY26, HEG’s revenue clocked ₹699 crore, up 23% YoY, with PAT zooming 74% to ₹143 crore — not bad for a sector that often smells like burnt carbon and accounting smoke.
At ₹533 per share, the company carries a market cap of ₹10,283 crore, trading at a lofty P/E of 39.8x and EV/EBITDA of 18.4x, which is roughly how an overenthusiastic analyst values hope and nostalgia. Its ROE is just 2.6% — yes, that’s not a typo, but maybe graphite isn’t the only thing under pressure.
Still, the company’s largest single-site graphite electrode plant in the world (100,000 TPA at Mandideep) keeps the carbon narrative strong. Oh, and it’s also working on a 20,000-ton graphite anode plant (for EV batteries) — because when you’ve burnt enough coke, you might as well charge one.
The stock’s up 20.7% over the past year and 37.3% over three years, because retail investors love a turnaround story, even if it’s written in soot.
2. Introduction – “From Furnace Fumes to Future Fads”
Once upon a carbon molecule, in the industrial alleys of Madhya Pradesh, HEG Ltd decided to make graphite electrodes — the unsung hero that melts scrap into steel in Electric Arc Furnaces (EAFs). Since 1976, it’s been grinding needle coke into billion-rupee brilliance.
Cut to FY26 — steel demand’s swinging like an EAF crane, and HEG is riding that volatility like a seasoned juggler with one burnt hand and one battery pack.
The company’s story has two acts:
Act I: Dominating the graphite electrode business with exports to 35+ countries.
Act II: Jumping into graphite anodes for EV batteries through its WOS TACC Ltd, because who doesn’t want to be part of the electric dream?
But behind the boardroom buzz lies a rather dry financial reality — subdued returns (ROE 2.6%), slow sales growth (3.9%), and heavy reliance on other income (₹362 crore last year).
Still, investors stay hooked because HEG is like that old rock band — unpredictable, loud, sometimes down, but still iconic enough to fill a stadium when the cycle turns.
3. Business Model – WTF Do They Even Do?
Let’s keep it simple. HEG makes graphite electrodes, a fancy way to say “giant pencils that melt steel scrap at 3000°C.”
Here’s how it works:
Input: Petroleum coke and needle coke (no, not that kind of coke).
Magic: Mix, mold, bake, and graphitize.
Output: Ultra-High Power (UHP), Super-High Power (SHP), and High Power (HP) graphite electrodes.
Customers: Top 20 steelmakers globally.
Around 67% of sales are exports, spread over 35+ countries — because apparently, even Japan and the US like Indian carbon better than their own.
The plant in Mandideep, MP, runs at 81% utilization, powered by 80 MW captive generation — two thermal plants and a hydropower plant. That’s right, HEG burns coal to make electrodes for “green” steel. Irony called; it’s glowing.
And now comes the spin-off drama — HEG is demerging its graphite business into HEG Graphite Ltd and merging Bhilwara Energy Ltd into itself. Translation: “We’re rearranging the carbon atoms for shareholder clarity.”
That’s half the reported P/E, proving again that math is mightier than market hype.
Witty note: Other income continues to do the heavy lifting (₹120 crore this quarter), while core operations remain moody like a furnace operator on night shift. Still, a 74% PAT jump deserves applause — even if it’s mostly from “non-operating” performance.
5. Valuation Discussion – Fair Value Range Only
Let’s attempt some sober number-crunching (without burning electrodes):
(a) P/E Method
Annualized EPS: ₹29.7 Industry P/E: ~39x (Graphite peers average) Fair value range (based on normalized cycle): → Lower bound (15x): ₹29.7 × 15 = ₹446 → Upper bound (25x): ₹29.7 × 25 = ₹742
(b) EV/EBITDA Method
EV = ₹10,801 Cr, EBITDA (TTM) ≈ ₹586 Cr EV/EBITDA = 18.4x (as per screener) If sector fair range is 12–18x, then: → Lower fair EV = ₹586 × 12 = ₹7,032 Cr → Upper fair EV = ₹586 × 18 = ₹10,548 Cr → Implied equity value ≈ ₹470–705 per share
(c) DCF Snapshot
Assume FCF of ₹280 Cr (FY25), 6% growth, 12% discount rate: → Intrinsic range: ₹500–650 per share
✅ Fair Value Range: ₹450 – ₹740 per share
Disclaimer: This range is for educational purposes only and not investment advice.
6. What’s Cooking – News, Triggers, Drama
Where there’s graphite, there’s always some smoke.
Oct 2025: SBI sanctioned ₹1,230 crore loan to TACC Ltd for its 20,000 MTPA graphite anode plant in Dewas, MP. Because someone in management finally realized that EV batteries are hotter than furnaces.
Sep 2025: HEG gave a ₹210 crore unsecured loan to Bhilwara Energy, its associate company — 9% interest, 1-year tenure. Family matters, you know?
Nov 2025: Board approved ₹633 crore OCD subscription in TACC and sold 26% stake in Texnere. Because in Bhilwara-land, every balance sheet is a group project.
GST Drama: The taxman dropped the ₹282.34 crore IGST notice, but not before giving HEG a mild heart attack and a few late-night board calls.
Restructuring: HEG Graphite demerger + Bhilwara Energy merger approved. Translation: fewer subsidiaries, same family names.
In short, the company is reinventing itself faster than an influencer after an old tweet resurfaces.
