Outlier in Focus – Graphite India

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We come across a large number of interesting stocks in Capitalmind SNAP Outliers, our discovery tool for stocks with momentum. See a video of how Outliers works, and how to use Outliers to find all-time highs. Here’s a stock we found interesting that’s been an outlier. Catch them all here.


Graphite India (GIL) manufacturer of Graphite Electrodes [manufacturing capacity of 80,000 tons per annum and used electric arc furnace (“EAF”) based steel mills along with being a consumable item for the steel industry] as well as Carbon and Graphite Specialty products [contributed 91% to FY2016 Sales] .

GIL has 4 manufacturing facilities [proximity to the three main ports of India offers logistic advantages] while the EU market while the foreign operations are looked at by the subsidiary based at Nuremberg, Germany with an Electrode capacity is 18,000 tons per annum.

Graphite India is the largest Indian producer of graphite electrodes by capacity which accounts for 12.6% of the global electrode capacity [other players include GrafTech, SGL Group, Showa Denko, Tokai Carbon and HEG].

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Other products manufactured by the company includes Calcined Petroleum Coke [used in electrode manufacturing] & Carbon Electrode Paste, Glass Reinforced Plastic Pipes [used in pipelines for water supply, cooling towers, industrial process, seawater pipelines and gasoline storage] and High Speed Steel [largest producer in India and mostly used in the manufacturing of cutting tools such as drills, taps, milling cutters, reamers, hobs, broaches etc.] & Alloy Tool Steels.

GIL also has a power generation capacity of 33MW through hydel and multi-fuel routes which is basically used as captive supply for the graphite electrodes business.

FY-2017 Financial Performance

  1. Average capacity utilization was 74% in FY2017 as compared to 62% in FY2016 [the company is targeting a consolidated capacity utilization of around 85% for FY2018].
  2. Decreased operating profit due to lower electrode prices coupled with higher input costs
  3. Reduced borrowings has led to a fall in finance charges [fell from Rs. 9.46 crore to Rs. 7.89 crore]

Outlier History

Touching a month high of Rs. 125.5/-, the stock has now breached its all time high of Rs. 152.95/-.

Valuation:

Graphite trades at a PE ratio of 27 times its 4 quarter trailing earnings. This is expensive given the low / single digit Return on Equity the stock has been seeing for quite a while now.

Stock Price

The stock has witnessed multiple breakouts just in the month of April with the price kissing the 52 week high of Rs. 170/-.

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