HEG posted solid Q1 FY27 performance with capacity utilisation above 90%, supported by better pricing despite lower volumes. While the company faces demand pressure in the Middle East, it expects higher global graphite electrode prices to boost earnings from October 2026. Investors are monitoring the upcoming NCLT order regarding the proposed Greentech business demerger.
Detailed Coverage
HEG has reported a steady performance for the first quarter of fiscal year 2027, successfully leveraging improved product realisations and operating efficiencies. Even as volumes saw a marginal decline, the company maintained capacity utilisation levels above 90%. This operating efficiency served as a key support factor during the quarter.
Global Demand and Pricing Outlook
The company is navigating a complex global environment. While demand in the Middle East remains under pressure due to ongoing geopolitical conflicts—with steel demand in the MENA region projected to contract by 4.5% in 2026—HEG is seeing more favourable conditions in the United States, Europe, and India. India continues to be a growth leader, with domestic steel production rising by 7.1% during the first half of 2026. To counter regional weaknesses, global graphite electrode manufacturers, including HEG, have moved to increase prices by $600 to $1,200 per tonne. HEG confirmed its order book is fully committed through September, with new orders being accepted at these increased rates, which are expected to reflect in earnings starting from October 2026.
EAF Growth and Regulatory Drivers
Long-term demand for graphite electrodes is increasingly tied to the adoption of the Electric Arc Furnace (EAF) method of steel production. Policies such as Europe's Carbon Border Adjustment Mechanism (CBAM) are accelerating this shift by penalising higher-emission steel production. With global EAF capacity projected to expand by approximately 71 million tonnes between 2026 and 2028, the company remains positioned to serve this transition. Additionally, HEG’s strategic stake in US-based peer Graftech provides exposure to the American market, which saw a 29% volume increase in the June quarter.
Corporate Restructuring and Monitorables
A significant event for shareholders is the proposed demerger of the Greentech business. This restructuring is intended to simplify the corporate structure and focus investor attention on the core graphite electrode operations. The matter is currently before the National Company Law Tribunal (NCLT), with the final order awaited.
Investors may monitor the execution of these price hikes and the potential for demand volatility stemming from the Middle East. Furthermore, the final NCLT pronouncement on the Greentech demerger and the subsequent valuation of the separated entities will be key developments to follow. While the company trades at approximately 19.4 times its estimated FY28 EV/EBITDA, future performance will depend on its ability to maintain margins amidst fluctuating global steel production and evolving trade policies in China.