HEG Hits 6-Year High After ₹172 Crore Block Deal, Rises 6%

HEG shares extended their winning streak for a third consecutive session on December 5, surging by over 6% to reach a near six-year high of ₹619. The rise followed a block deal valued at ₹172 crore.

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A total of 28.8 lakh HEG share, representing a 6% stake in the company, exchanged hands on the exchanges at an average price of ₹600 per share. Notably, the block deal's floor price reflected a premium of over 3% compared to the stock's closing price on Wednesday. However, the parties involved in the transaction could not be immediately identified by Moneycontrol.

By 9:27 AM IST, HEG shares were trading at ₹616.45 on the NSE, marking a significant rally of over 40% in the past week.

The graphite electrode manufacturer's stock had gained over 16% in the previous trading session amid reports that China has increased scrutiny of its graphite exports to the US and imposed restrictions on dual-use materials such as germanium and gallium. These developments have raised concerns about potential supply shortages in the global market.

As a leading producer of graphite electrodes, HEG is well-positioned to benefit from any supply disruptions. The company generates over 70% of its revenue from exports, with the US being a major market.

HEG recently expanded its graphite electrode manufacturing capacity to 100,000 tonnes, establishing itself as the largest single-location producer in the western world. This enhanced capacity is expected to provide cost advantages over competitors.

In the September quarter, HEG achieved a global high of 80% capacity utilization and aims to sustain this level for the rest of the year. While reduced global demand has exerted pressure on pricing, HEG remains optimistic about medium- and long-term industry prospects. Should China's export restrictions lead to a supply gap, HEG anticipates stronger demand and earnings growth.

The shift toward electric arc furnace (EAF) steelmaking, which relies on graphite electrodes, is expected to drive additional demand. HEG forecasts a global increase of 200,000 tonnes in electrode demand by 2030, excluding contributions from China.

Furthermore, the government's ₹9,000 crore production-linked incentive (PLI) scheme for battery components presents an opportunity for HEG, which is exploring entry into the graphite anode market, a crucial element in lithium-ion batteries.

With robust fundamentals and favorable market conditions, HEG remains a prominent player to watch in the graphite industry.