InvestorQ : What is your view on Graphite India after the latest fall in profits? Is the worst over and can I look to buy the stock?
Tisha Malhotra made post

What is your view on Graphite India after the latest fall in profits? Is the worst over and can I look to buy the stock?

Answer
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Moii Chavate answered.
12 months ago


Let us look at the latest results of Graphite India for the September quarter. It reported an 83% fall in consolidated net profit to Rs.185 crore largely on account of lower sales revenues during the quarter. Graphite is a major manufacturer of graphite electrodes and its products are extensively used in the steel industry for its electric arc furnaces. The graphite electrodes maker had posted a net profit of Rs 1,113 crore for the corresponding period of the previous fiscal year.

The real problem was in total sales as the revenue from operations fell almost 2/3rd from Rs.2345 crore to Rs.882 crore in the Sep-19 quarter. The performance for the quarter was impacted due to lower volumes and realisation as compared to the same period last year. The reasons were not far to seek. Lower steel production and demand globally implied a steep cut in the demand for electrodes. Not just that. In the Indian market, Graphite India is facing intense competition from global graphite electrode manufacturers, especially Chinese electrode makers which manufacture at much lower costs.

The problems for Graphite to be a lot more structural in nature and it would be wise to keep away from the stock till the situation in the steel industry stabilizes and India has a credible answer for cheap Chinese imports.