Graphite: invest INR6B for increased graphite electrode capacity

Graphite: invest INR6B for increased graphite electrode capacity

In a significant development, shares of HEG, a leading graphite electrode manufacturer, surged by over 10 percent on July 31, 2025, following the company's announcement of a return to profitability and a substantial capacity expansion. The stock of HEG, along with Graphite India, saw a notable rise, with HEG's shares reaching a year-high and up by 11 percent year-to-date [1].

The company reported a strong Q1FY26 net profit of Rs 71.8 crore, a significant improvement from the Rs 2.6 crore loss in the same period last year. Revenue also grew to Rs 613 crore from Rs 570 crore, with a three-fold margin growth to 17.29%. HEG's existing capacity utilization rate stands at 85-90% [1].

The board approved a 15,000 TPA graphite electrode capacity expansion at a cost of around Rs 650 crore, which is expected to be funded via internal accruals and debt if required. This expansion is anticipated to be completed in 30 months. The move comes amidst growing geopolitical tensions and supply chain disruptions, particularly in the EV sector. The US has recently sought to reduce its reliance on Chinese components, imposing preliminary anti-dumping duties of 93.5% on Chinese graphite imports, citing unfair subsidies and dominance in processing capacity [1].

The capacity expansion by HEG is a strategic move to capitalize on the growing demand for graphite electrodes, a critical raw material in the production of electric vehicle batteries. As the US supply of graphite is heavily dependent on Chinese imports, the US is looking to diversify its sources to ensure a stable supply chain [1].

In conclusion, HEG's announcement of profitability and a substantial capacity expansion is a positive signal for the graphite electrode market. The company's strategic move to increase capacity is likely to be well-received by investors and financial professionals, given the growing demand and geopolitical uncertainties in the sector.

References:
[1] https://www.moneycontrol.com/news/business/markets/electrode-maker-heg-s-shares-soar-10-percent-on-return-to-profit-and-capacity-expansion-taking-graphite-india-higher-13356314.html