A Report on Research Analysis

1. RESEARCH REPORT:
HEG Ltd
Bhagwati Maurya
Company Analysis

2. 1
1 RESEARCH REPORT: HEG Ltd
A Report on
Research Analysis of HEG Ltd.
Prepared by
Bhagwati Maurya
To
Finlatics
Year: 2019 – 20

3. 2
2 RESEARCH REPORT: HEG Ltd
Contents
1.General Overview
2.Management
3.S.W.O.T Analysis
4.Competitive Analysis
5.Conclusion

4. 3
3 RESEARCH REPORT: HEG Ltd
About Company
Registered Address:
Mandideep, Near Bhopal, Raisen,
Madhya Pradesh – 462046
Phone: +91 – 07480 – 233524 – 27
Registrar Office:
F – 65, First Floor,
Phase I, New Delhi – 110020
Key People’s
Ravi Jhunjhunwala Chairman, MD, & CEO
Vice Chairman Shekhar Agarwal
Independent Director Kamal Gupta
Director Riju Jhunjhunwala
Company Secretary Vivek Chaudhary
Independent Director D N Davar
Company’s Background
Industry Electrodes – Graphite’s
House Name/Group LNJ Bhilwara
Year of Incorporation 1972
Auditors: SCV & Co.
Listed on: Bombay Stock Exchange (BSE) and National Stock Exchange (NSE)

5. 4
4 RESEARCH REPORT: HEG Ltd
1. GENERAL OVERVIEW
Summary
HEG Ltd, a premier company of the LNJ Bhilwara group, is today India’s
leading graphite electrode manufacturer. It has one of the largest integrated
Graphite Electrode plants in the world, processing sophisticated UHP (Ultra
High Power) Electrodes. The company also operates three power generation
facilities with a total rated capacity of about 76.5 MW. The power generation
primarily fuels the graphite electrode manufacturing operations, with the
surplus being sold in the open market. The company produces two grades of
graphite electrodes, High Power and Ultra High Power, which are
manufactured according to the customer’s needs and requirements.
The company registered its ever highest ever net profit of Rs 1,081.34 crore.
The company registered the highest electrode production at 64,000-plus MT
in 2017-18 against 50,000 MT level in 2016-17. Even as demand surged, the
company continued to strengthen its operational efficiencies. The company
repaid its entire long-term debt and has plans to invest the cash surplus in
avenues that enable it to sustain its growth momentum.
History
HEG Limited, incorporated in 1972, is a leading manufacturer and exporter of
graphite electrodes in India and operates world’s largest single-site
integrated graphite electrodes plant at Mandideep in Madhya Pradesh.
HEG Ltd (earlier known as Hindustan Electro-Graphite’s Ltd) was incorporated
in the year 1977. They started as an importer of electrodes and later turned to
production of Graphite electrodes with financial and technical assistance from
La Société des Electrodes Et Refractories Savoi a subsidiary of Pechiney France.
In April 2007 the company made an investment of Rs 35 crore towards de-
bottlenecking in the graphite electrode plant.

6. 5
5 RESEARCH REPORT: HEG Ltd
2. MANAGEMENT
The company’s top management includes Dr. Kamal Gupta, Dr. O P Bahl, Mr. D
N Davar, Mr. L N Jhunjhunwala, Mr. Ravi Jhunjhunwala, Mr. Riju Jhunjhunwala,
Mr. S N Bhattacharya, Mr. Satish Chand Mehta, Mr. Shekhar Agarwal,
Mrs.Ramni Nirula, Mrs. Vinita Singhania. Company has SCV & Co. LLP as its
auditors as on 31-12-2018, the company has a total of 39,959,142 shares
outstanding.
Capital Structure
(Rs. In Crores)
Period Instrument Authorized
Capital
Issued
Capital
PAID – UP
Share
(nos)
Face
Value
Capital
2017 – 18 Equity
Share
55.00 40.00 39959142 10.0 40.0
HEG Ltd. key Products/Revenue Segments include Electrodes Graphite which
contributed Rs 2665.42 Crore to Sales Value (96.62 % of Total Sales), Export
Incentives which contributed Rs 73.28 Crore to Sales Value (2.65 % of Total
Sales), Other Operating Revenue which contributed Rs 10.81 Crore to Sales
Value (0.39 % of Total Sales), Power which contributed Rs 6.64 Crore to Sales
Value (0.24 % of Total Sales) and Fly Ash which contributed Rs 2.25 Crore to
Sales Value (0.08 % of Total Sales)for the year ending 31-Mar-2018.
Stability of Management
Company and Financial Analysis:
Company has reduced debt. Stock is providing a good dividend yield of 3.63%.
Company has good consistent profit growth of 47.67% over 5 years.
Company has a good Return on Equity (ROE) track record: 3 years ROE 32.21%.
Performance of Heg ltd. Shows, Increase in NIFTY Mid Cap 100* - 16.56 (5th
Year)

7. 6
6 RESEARCH REPORT: HEG Ltd
Financial Information:
The company had shown good profits over past 5 years.
(Rs. In Crores)
Particulars/Years March 18 March 17 March 16 March 15 March 14
Total Income 2762.43 867.17 873.61 1252.06 1488.58
Total
Expenditure
1028.49 779.31 733.04 1044.45 1220.82
EBITDA 1733.95 87.86 140.57 207.61 267.76
Profit and Loss
for the year
1081.34 -50.05 -7.55 61.18 111.98
Reported PAT 1081.34 -50.05 -7.55 39.00 86.62
Particulars/Years March 18 March 17 March 16 March 15 March 14
Net Worth 1808.62 871.79 921.00 940.72 924.07
Total Liabilities 2106.07 1419.27 1597.55 1769.01 1757.44
Net Block 829.65 885.04 932.43 906.54 940.57
Total Assets 2106.07 1419.27 1597.55 1769.01 1757.44
Key Items
Particulars/Year 2018 2017 2016 2015 2014
Equity Dividend
(%)
361.06 .00 35.99 24.00 49.80
Share in Issue
(lakhs)
399.59 399.59 399.59 399.59 399.59
EPS –
Annualised (Rs.)
270.61 -12.25 -1.89 9.76 21.68
For the quarter ended 31-12-2018, the company has reported a Standalone
sale of Rs 1864.99 Crore, up 3.97 % from last quarter Sales of Rs 1793.80 Crore
and up 121.31 % from last year same quarter Sales of Rs 842.71 Crore
Company has reported net profit after tax of Rs 866.83 Crore in latest quarter.

8. 7
7 RESEARCH REPORT: HEG Ltd
3. S.W.O.T ANALYSIS
Strengths
- Success of new product mix - HEG provides exhaustive product mix options
to its customers. It helps the company in catering to various customers
segments in the Electronic Instr. & Controls industry.
- Strong brand recognition - HEG products have strong brand recognition in
the Electronic Instr. & Controls industry. This has enabled the company to
charge a premium compare to its competitors in Electronic Instr. & Controls
industry.
- High margins compare to Electronic Instr. & Controls industry's competitors -
Even though HEG is facing downward pressure on profitability, compare to
competitors it is still racking in higher profit margins.
- Wide geographic presence - HEG has extensive dealer network and
associates’ network that not only help in delivering efficient services to the
customers but also help in managing competitive challenges in Electronic Instr.
& Controls industry.
Weaknesses
- Niche markets and local monopolies that company’s like HEG able to exploit
are fast disappearing. The customer network that HEG has promoted is proving
less and less effective.
- Low investments into HEG's customer-oriented services - This can lead to
competitors gaining advantage in near future. HEG needs to increase
investment into research and development especially in customer services-
oriented applications.
- Business Model of HEG can be easily imitated by the competitors in the
industry name. To overcome these challenges company needs to build a
platform model that can integrate suppliers, vendors and end users.

9. 8
8 RESEARCH REPORT: HEG Ltd
Opportunities
- Lowering of the cost of new product launches through third party retail
partners and dedicated social network. HEG can use the emerging trend to
start small before scaling up after initial success of a new product.
- Accelerated technological innovations and advances are improving industrial
productivity, allowing suppliers to manufacture vast array of products and
services. This can help HEG to significantly venture into adjacent products.
- Rapid Expansion of Economy as the US economy is improving faster than any
other developed economy, it will provide HEG an opportunity to expand into
the US market. HEG already have know-how to operate into the competitive
US market.
- Lower inflation rate - The low inflation rate brings more stability in the
market, enable credit at lower interest rate to the customers of HEG. This will
increase the consumption of HEG products.
Threats
- Shortage of skilled human resources - Given the high turnover of employees
and increasing dependence on innovative solution, company can face skilled
human resources challenges in the near future.
- Commoditization of the product segment - The biggest challenge for HEG
and other players in the industry is the increasing commoditization of the
products in Technology industry.
- Changing demographics - As the baby boomers are retiring and new
generation finding hard to replace their purchasing power. This can lead to
higher profits in the short run for HEG but reducing margins over the long run
as young people are less brand loyal and more open to experimentation.
- Changing political environment with US and China trade war, Brexit
impacting European Union, and overall instability in the middle east can impact
HEG business both in local market and in international market.

10. 9
9 RESEARCH REPORT: HEG Ltd
4. COMPETITIVE ANALYSIS
The two competitors of HEG Ltd are Graphite India Ltd. And Bobshell
Electrodes Ltd.
Peer Comparison:
Particulars/Name
of Company
HEG Ltd. Graphite India
Ltd.
Bobshell
Electrodes Ltd.
Market Capacity 8915 Cr. 9069 Cr. N/A
Earnings Per
Share (EPS)
8.09 9.80 -7.23
Price Earning
(P/E)
270.61 46.76 -0.17
Dividend Yield
(%)
3.59 3.66 N/A
Net Profit 1081.34 913.63 N/A
Total Assets 2106.07 2757.08 N/A
As per information, Market Capacity and Earning Per Share of Graphite India
Ltd. is greater than HEG Ltd.
Price Earning (P/E) Ratio of HEG Ltd. is more than Graphite India Ltd. and
Bobshell Electrodes Ltd. where investors can expect higher earnings in HEG
Ltd.
The Net Profit of HEG Ltd. is greater than Graphite India Ltd, but Total Assets is
less of HEG as compared to Graphite India.

11. 10
10 RESEARCH REPORT: HEG Ltd
5. CONCLUSION
In previous 5 years Company (Heg Ltd.) had shown consistent profit, without
any trends in last five years. Company has a strong relationship with its
shareholder. Company’s profit can be studied by Fundamental basis, which
shows of long-term investment. The Company had also participated in
Corporate Social Responsibility (CSR) known as Swachhta-hi-Seva. Although
CSR has been mandatory for all international companies. Heg ltd. Also had
earned Rewards and Recognition, Certificates.
By analysing all the information above, conclusion states;
• Revenue per Share has Increased as compared to last five years
• Earnings per Share has reached to its peak point
• Return on Net worth has also increased as compared to previous year.
End of the Report