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HEG Limited Q4 and FY24 Earnings Conference Call Summary
Conference Call Overview • Date: June 3, 2024 • Key Executives: Ravi Jhunjhunwala (Chairman and CEO), Puneet Anand, Gulshan Kumar Sakhuja, Riju Jhunjhunwala • Focus: Company performance, global steel market outlook, restructuring plans
Global Steel Market Outlook • Projected rebound in global steel demand, especially in India due to infrastructure investments. • Challenges: Electrode pricing and needle coke market conditions. • HEG's expansion to 100,000 tons capacity is complete.
Restructuring and Demerger • HEG to split into two companies: • HEG Graphite Limited: Focus on graphite business. • HEG Greentech Limited: Focus on renewable energy assets (hydro, wind, battery solutions). • Shareholders will receive one share in each new company for every share held. • Restructuring expected to take 15-18 months.
Financial Performance • Decline in revenue and net profit for the year ending March 31, 2024. • Company remains debt-free. • Recommended final dividend of 225%, pending shareholder approval.
Graphite Electrode Business • High capacity utilization and market share gains despite industry challenges. • Optimism about future demand for electric arc furnace steel.
Needle Coke Prices and Margins • No shortage of needle coke; prices have dropped in line with electrode prices. • HEG avoided significant inventory write-downs compared to peers.
Mergers and Acquisitions • Discussion on HEG's stake in Bhilwara Energy and TACC project for graphite anode manufacturing. • Bhilwara Energy valued at INR 1,500 crores; HEG's share at INR 750 crores.
Future Projections • Revenue expectations for HEG Greentech's businesses: • Bhilwara Energy: INR 17-18 crores. • Malana Power: INR 100-150 crores in dividends. • RePlus: INR 250-400 crores for FY '24-'25. • TACC project capex estimated at INR 1,600-1,800 crores over 18 months.
Hydro Business and TACC Valuation • Malana Power Company has a total hydro capacity of 300 megawatts. • Hydro business valued at INR 3,000 crores; HEG's share at INR 1,500 crores. • TACC valued at INR 280 crores after an INR 80 crores investment.
Revenue Potential and Operational Timelines • Expected EBITDA from the anode business: INR 400-425 crores by year four. • TACC plant operations expected to start by mid-2025, with capacity utilization projections.
Dividend Expectations • Expected annualized dividend between INR 100-150 crores. • Additional INR 400 crores in transmission income anticipated.
Conclusion • Ravi Jhunjhunwala addressed speculations post-demerger announcement and offered to engage in further discussions for clarity.
HEG Limited Q3 FY24 Earnings Conference Call Summary
Conference Call Details • Date: February 21, 2024 • Notice Issued: February 25, 2024 • Key Executives Present: • Mr. Ravi Jhunjhunwala (Chairman and CEO) • Mr. Riju Jhunjhunwala (Vice Chairman) • Other senior management • Moderator: Mr. Navin Agrawal (SKP Securities) • Transcript Availability: On the company's website
Financial Highlights • Global Steel Production: Stagnant at 1,882 million tons in 2023. • Chinese Production: Decline in the second half of the year; increased exports. • India's Steel Production: 12% growth driven by strong domestic demand. • HEG's Capacity Utilization: Maintained at 85%. • Future Demand for Graphite Electrodes: Anticipated increase of 150,000 to 200,000 tons by 2030. • New Plant Announcement: Graphite anode powder plant expected operational by mid-2025. • CFO Report: Decrease in revenue and net profit due to tough market conditions.
Key Discussions • Capacity Utilization: Confirmed at 85% for Q3; consistent over the last three quarters. • Volume Growth Expectations: Anticipated 10% to 12% increase by year-end. • Electric Arc Furnace (EAF) Production: Stagnation noted globally. • Anode Business Margins: Planned EBITDA margin of 25% to 30% starting in 2025.
Competitive Landscape • Concerns Addressed: • Competition from China and new battery technologies. • HEG's operational efficiency leading to higher capacity utilization compared to competitors (40-65%). • M&A Opportunities: Limited due to industry concentration among few players. • Needle Coke Supply: Demand and supply expected to align as the industry ramps up.
Future Production Plans • Timeline for Expanded Capacity: Expected production to begin in the second half of 2025 (July to September). • Anode Manufacturing Capabilities: In-house expertise and ongoing R&D; pilot plant producing 10 tons per month. • Government Support: Subsidies reducing power costs for the Madhya Pradesh facility.
Conclusion • Market Positioning: HEG positioned as a potential leader in anode production with significant government support for domestic manufacturing. • Closing Remarks: Gratitude expressed by Ravi Jhunjhunwala for participant questions and interest in the company.
HEG Limited Q2 FY24 Earnings Conference Call Summary
Date and Context • Date of Call: November 16, 2023 • Transcript Release: November 20, 2023 • Key Executives Present: Ravi Jhunjhunwala (Chairman and CEO), Gulshan Sakhuja (CFO)
Steel Industry Overview • Global Trends: Decline in steel production outside China; India saw an 11.6% increase. • Electric Arc Furnaces (EAFs): Growing trend due to lower carbon emissions; new capacities expected by 2030.
Company Developments • Capacity Expansion: Completed expansion to 100,000 tons; new 20,000-ton graphite anode plant planned. • Market Outlook: Optimistic about future growth driven by EAF market despite current subdued demand.
Financial Performance (Q2 FY24) • Revenues: INR 614 crores (up from INR 598 crores YoY). • EBITDA: Decreased to INR 130 crores (from INR 198 crores). • Net Profit: Standalone net profit fell to INR 62 crores (from INR 130 crores); consolidated net profit at INR 96 crores (down from INR 169 crores). • Debt Status: Company remains debt-free with INR 1,010 crores in treasury.
Market Challenges and Competition • European Antidumping Duties: Company maintained market share despite a 7% duty. • Competition with GrafTech: HEG's pricing remains competitive; GrafTech benefits from captive needle coke production.
Anode Plant Insights • Chinese Export Ban: Positive for HEG, allowing increased domestic production. • Production Process: Differences between electrode and anode production confirmed.
Capacity Utilization and Inventory • Utilization Rates: Approximately 90% for Q1, 85% for Q2; expected decline to 75% in upcoming quarters. • Inventory Management: Finished goods inventory maintained at 2.5 months of production.
Strategic Focus • Critical Minerals: Focus on synthetic graphite, not mined products. • Battery Production: Ongoing discussions with major Indian companies like Tata and Reliance.
Future Plans and Sustainability • Anode Realization Prices: Range from $5,000 to $15,000 per ton. • Carbon-Neutral Production: New anode plant aims for environmentally friendly practices. • Sustainability Initiatives: Commitment to reducing carbon emissions through renewable energy.
Market Forecast • Graphite Anode Demand: Expected rise from zero to 1.2 lakh tons by 2030. • Raw Material Sourcing: Plans to source primarily from India and non-Chinese suppliers.
Conclusion • Engagement: Appreciation for participants' involvement in the call.
HEG Limited Q1 FY2024 Earnings Conference Call Summary
Overview • Date: August 18, 2023 • Led by: Chairman and CEO Ravi Jhunjhunwala • Key focus: Global steel production decline and future demand expectations
Market Insights • Steel Production: 4% decline in H1 2023; rebound expected by 2024 • Production Shift: Increasing move towards electric arc furnace (EAF) steel production • Graphite Electrode Demand: Anticipated growth due to EAF production
Company Developments • Production Capacity Expansion: Increasing from 80,000 to 100,000 tonnes • Graphite Anode Subsidiary: Plans to produce 10,000 tonnes by mid-2025
Financial Performance (Q1 FY2024) • Revenue: Rs. 671 Crores (down from Rs. 722 Crores YoY) • EBITDA: Rs. 178 Crores (down from Rs. 205 Crores YoY) • Net Profit: Rs. 98 Crores standalone (down from Rs. 134 Crores YoY); Rs. 139 Crores consolidated (down from Rs. 159 Crores YoY) • Debt Status: Debt-free with Rs. 980 Crores in treasury
Operational Updates • Fifth Operation Delay: Minor equipment issue; resolution expected in 3-4 weeks • Inventory Strategy: Holding more finished goods to meet future demand • Needle Coke Sourcing: Primarily from Europe, US, and Japan; no inventory losses reported
Graphite Anode Project • Machinery Selection: From multiple large Chinese companies • Land Acquisition: 100 acres secured; targets set for Q1 2025
Strategic Developments • Energy Storage Solutions: Participation through subsidiary Bhilwara Energy with projects worth ₹120 crores • Replacement Cost of Assets: Estimated between ₹6,000 to ₹8,000 crores for a new Greenfield plant
Capacity Utilization • Current Utilization: Approximately 90% on 80,000-ton capacity • Annual Projection: 80-85% utilization expected
Future Projections • Graphite Anode Pricing: Estimated EBITDA margin of 25-30% • Market Demand: Anticipated growth to 50,000-60,000 tons in India by 2025 and 300,000 tons by 2030
Closing Remarks • Production Plans: HEG aims to produce 10,000 tonnes of graphite anode powder • Market Size: Current market size for graphite anodes is around 50,000 tonnes • Next Follow-Up: Scheduled in three months
HEG Limited Q4 and FY23 Earnings Conference Call Summary
Overview • Date: June 1, 2023 • Led by: Chairman and CEO Ravi Jhunjhunwala • Positive outlook for global steel industry: • Projected growth: 2.3% in 2023, 1.7% in 2024 • Increased demand for environmentally friendly electric arc furnace (EAF) steel production
Company Developments • Expansion of production capacity from 80,000 to 100,000 tons • Progress on new subsidiary focused on graphite anodes: • Target production: 10,000 tons by mid-2025 • Strong financial results and high capacity utilization
Financial Performance • Revenue increase: INR 2,467 crores (FY23) from INR 2,201 crores (FY22) • Q4 revenue: INR 617 crores (down from INR 673 crores YoY) • EBITDA: INR 729 crores (up from INR 607 crores) • Net profit after tax: INR 456 crores (up from INR 391 crores) • Consolidated net profit: INR 532 crores (up from INR 431 crores) • Debt-free status and proposed final dividend of INR 42.50 per share
Market Insights • Significant growth in U.S. sales (2.5 to 3 times increase over four years) • Addressed competition from silicon anode batteries: • Graphite remains essential in lithium-ion batteries for 10-15 years • Focus on multiple business segments: energy storage and green hydrogen
Demand and Capacity • Increased demand for graphite electrodes driven by China's EAF capacity growth: • EAF capacity in China increased from 5% to 12%, targeting 20% • Anticipated investment of $50-55 billion in EAF capacities in Europe and America • Expected electrode demand growth correlating with new EAF capacities
Pricing and Market Strategy • Needle coke prices decreased, but electrode prices expected to rise with demand • Capacity utilization target: 100,000 tons by mid-2023 • Balanced approach to excess capacity and margin maintenance: • Not aggressively pushing for sales of additional capacity
Future Outlook • Anticipation of demand rebound starting in 2024 • Optimism about the industry's future and ongoing engagement in 3-month contracts for sales
HEG Limited Q3 FY23 Earnings Conference Call Summary
Overview • Date: February 20, 2023 • Led by: Chairman and CEO Ravi Jhunjhunwala • Focus: Geopolitical challenges affecting steel production, particularly in Europe and Japan.
Industry Outlook • Short-term: Bearish outlook for the steel industry due to high energy prices and inflation. • Long-term: Strong growth potential for electric arc furnace (EAF) steel production driven by decarbonization and demand for electrodes.
Company Performance • Expansion: New capacity of 100,000 tons expected by mid-April 2023. • Capacity Utilization: • Q3: 60% • Current quarter: 70% • Financials: • Revenues: INR 530 crores (down from INR 598 crores previous quarter) • EBITDA: INR 170 crores (down from INR 198 crores) • Net Profit: INR 103 crores (down from INR 130 crores) • Debt-free with treasury of INR 1,015 crores.
Capital Expenditure • Total planned: INR 1,200 crores; INR 1,000 crores spent. • Completion of final phase expected by April 2023.
New Ventures • Diversification into graphite anodes for lithium-ion batteries. • Target production capacity: 10,000 tons by Q2 2025.
Electric Arc Furnace (EAF) Insights • U.S. EAF commissioning: 7 million metric tons in the past year; 14 million expected in 12-24 months. • EAF adoption: U.S. produces over 72% of its steel via EAF.
Market Challenges • Graftech's production issues due to plant closure affecting electrode components. • Anticipated reduced deliveries and low capacity utilization in the steel industry for at least two more quarters.
Future Demand and Supply • Needle coke pricing: Expected increase in availability may help maintain margins. • Finished goods inventory being built up in anticipation of future demand.
Financing and Growth • New anode business segment requiring INR 2,000 crores in capital expenditure. • Financing primarily through internal funds with some bank financing.
Conclusion • Positive outlook for future sales and demand for EAF production in Europe and America, supported by established relationships and qualifications.