HEG shares showing 80% plunge on trading apps; here's why

Against a previous close of Rs 2,570.80 apiece, HEG shares opened at Rs 511 apiece on Friday, down 80.12 per cent, surprising a few investors. The fall in the shares of graphite electrode player was due to the stock getting split from face value of Rs 10 each into shares with face value of Rs 2 each.

In a stock split, already owned shares are split into shares with smaller face values in a bid to increase liquidity on the counter.

It is possible that trading apps of certain brokerages might be showing the unadjusted price for HEG and, thus, suggesting an 80 per cent-plus fall on the counter. Adjusted of stock split, HEG shares were trading at Rs 496 on BSE, down 3.53 per cent.

HEG is a leading graphite electrode manufacturer, which has one of the largest integrated graphite electrode plants in the world, processing UHP (Ultra High Power) electrodes. The company exports over 70 per cent of its production to more than 30 countries of the world.

Jefferies had in August suggested a buy on the stock. HEG, Jefferies said, has a current installed electrode capacity of 100,000 mt and recently expanded its capacity by 20,000 mt, which was commissioned in November 2023. Jefferies likes HEG's robust balance sheet, marked by minimal debt and sizable cash balance and investments including treasury size.

For HEG, Jefferies values the stock at EV/Ebitda multiple of 7 times, at a slight discount to stock's historical 10-year average multiple.

In its base case for HEG, Jefferies assumed graphite electrode average selling price of $4,900 per mt in FY25, $5,500 per mt in FY26 and $5,500 per mt in FY27. It assumed the average needle coke price over FY25-27 at $2,000 per mt. "We expect op-margin to bottom out at 14.4 per cent in FY25 and expand to 34.6 per cent over FY25-27," it said.