HEG Q1 FY27 Results Analysis: PAT Jumps 74%, Margin Expands 640 bps

HEG Ltd's Q1 FY27 numbers came in strong, with revenue of Rs. 680.91 Cr (+11.12% YoY) and PAT growth of +52.51% YoY. Here's a quick read of what worked, what to watch, and what management said.

Quarter Snapshot

HEG delivered a strong Q1 with standalone EBITDA margin of 23.69%, beating its own ~20% guidance by a wide margin. Revenue grew 11% YoY, driven by the graphite segment, while cost control led to 640 bps margin expansion. Normalized PAT grew 74% YoY. The demerger of the graphite business is progressing with NCLT approval pending. Concerns include fair value volatility from GrafTech investment and contingent liabilities at associate companies, but the underlying operating performance is robust.

Key Investment Insights

Key Positives

• Standalone EBITDA margin expanded 640 bps YoY to 23.69%, exceeding the ~20% guidance.
• Standalone revenue grew 11.1% YoY to Rs.680.91 Cr, with graphite segment revenue up 11.3% YoY.
• Graphite segment margin doubled to 22.08% from 11.11% YoY.
• Normalized PAT (excluding fair value impact) grew 74.4% YoY to Rs.129.51 Cr.
• Total expenses grew only 2% YoY, demonstrating operating leverage.
• Share of profit from associates contributed Rs.30.50 Cr, up 86.7% YoY.
• Demerger scheme approved by shareholders and creditors, NCLT order reserved.

Risk Factors

• Fair value loss of Rs.21.43 Cr on GrafTech equity shares (consolidated) introduces volatility.
• Power segment revenue declined 16.9% YoY due to seasonality.
• Cost of materials consumed as % of revenue increased slightly (+20 bps YoY).
• Associate projects (NHPL, CYHPL) have contingent liabilities under litigation/arbitration.