Shares of graphite electrode manufacturers Graphite India and HEG were in high demand on Monday, after brokerage Jefferies maintained its ‘buy’ rating for each and raised its target prices for the stocks by up to 49 per cent.  

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HEG shares gained by as much as Rs 100.7, or 5.9 per cent, to Rs 1,798.2 apiece in intraday trade on BSE, halting a two-day losing streak. The scrip closed over 5 per cent higher at Rs 1790.45 apiece. The Graphite India stock rose by Rs 18.1, or 4.2 per cent, to touch the Rs 450 apiece mark at the strongest level of the day, continuing to gain for a second straight session. Graphite India's stock closed 3.48 per cent higher on BSE at Rs 446.05 apiece.

Analysts say rising demand for electric arc furnaces (EAFs) around the globe is set to boost the profitability of graphite electrode makers.  

What Jefferies makes of the HEG and Graphite India stocks 

Jefferies maintained a 'buy' rating each on HEG and Graphite India. It raised its target price for HEG by Rs 2,170 apiece from Rs 1,460 apiece, and on Graphite India to Rs 515 apiece from Rs 420 apiece. 

HEG and Graphite are export-focused companies, earning about 70 per cent and 50 per cent of their revenue from exports respectively.  

The production of electric arc furnaces is expected to increase to 100 MT by 2030, boosting demand for electrodes globally, according to the brokerage.  

An electric arc furnace is an extremely hot enclosed space where heat is produced using electrical arcing for melting certain metals and alloys, such as scrap steel, without changing their electrochemical properties. 

What other brokerages say 

B&K Securities retained a 'buy' call on Graphite India with a target price of Rs 530 apiece, citing better demand, higher EAF capacity utilisation and lower needle coke costs.  

ICICI Direct continued with a 'buy' rating on HEG stock with a target price of Rs 2,025 apiece.  

"We have assigned BUY rating on HEG, on the back of the trend in shift globally towards EAF route of steelmaking which augurs well for graphite electrode demand. Also, HEG is on the verge of commissioning its capacity expansion plans which will aid volume growth going forward," the brokerage said in a research report. 

Here’s how the companies performed in the June quarter 

HEG  

HEG reported a 12.5 per cent fall in net profit to Rs 139.1 crore for the quarter ended June. Its revenue for the three-month period stood at Rs 671.4 crore as against Rs 722 crore for the corresponding quarter a year ago. 

Graphite India  

The company reported a consolidated net loss of Rs 30 crore for the April-June period as against a net profit of Rs 24 crore for the year-ago period. Its revenue came in at Rs 747 crore, a decline of 13.7 per cent on a year-on-year basis. 

How HEG and Graphite India shares have performed in the recent past 

In 2023 so far, HEG has gained over 61 per cent and Graphite India risen 14 per cent as against a six per cent rise in the headline Nifty50 index.  

HEG  

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