HEG Ltd., the best performing stock last year, continues to beat peers in 2018 as well. And still, it's the cheapest among domestic and overseas rivals.
The graphite maker has outperformed local peer Graphite India Ltd. and given returns on par with at least three of its global rivals Tokai Carbon, Showa Denko and the newly listed Graftech. The company is trading at a trailing 12-month enterprise value to Ebitda multiple of 8, at least 27 percent cheaper than domestic and overseas peers.
Backward integration and the high-yielding carbon black have led to higher valuations for international players, said Tarang Bhanushali, assistant vice president-research at IIFL Private Wealth.
Graphite India has a relatively better balance sheet than HEG, contributing to its higher valuations, Bhanushali said.
Jefferies has rated HEG a 'buy' with a revised target price of Rs 4,400, a 30 percent upside, citing improving earnings and balance sheet and a strong outlook for graphite electrode prices.
Prices of such electrodes, used in steelmaking through electric arc furnaces, had spiked last year after China shut down polluting units as they use highly polluting needle coke as raw material.