HEG Q1 FY27 Earnings Call: Guides 28-29% EBITDA Margins, Anode Project on Track for Q1 FY27-28

HEG Ltd held its Q1 FY27 earnings call on July 22, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Standalone Financial Recovery Led by Volume, Mix & Cost Management

• Standalone Q1 FY26-27 revenue of Rs.681 Cr — up 11% YoY from Rs.613 Cr (Q1 FY25-26) and up 13% sequentially from Q4 FY25-26, driven by better product/geographical mix.
• Standalone EBITDA surged 38% YoY to Rs.211 Cr — margin expanded 600 bps to 29% (vs 23% in Q1 FY25-26), recovering sharply from a Rs.126 Cr EBITDA loss in Q4 FY25-26.
• Standalone PAT improved 53% YoY to Rs.110 Cr — vs Rs.72 Cr in Q1 FY25-26; consolidated PAT stood at Rs.122 Cr, up 23% YoY from Rs.100 Cr.
• Segmental profit from electrode operations improved from $14 Mn to $140 Mn — in Q1 FY26-27, benefiting from higher realisations while consuming older, lower-cost needle coke inventory.
• Balance sheet remains debt-free with treasury of Rs.858 Cr — as of 30 June 2026, providing financial flexibility; other income in Q1 FY26-27 was Rs.43 Cr (Rs.7-8 Cr interest income, balance from fair valuation gains).

Steel Output Shifts Westward; Structural EAF Growth Supports Electrode Demand

• Global steel output outside China grew 2.1% YoY to 431 MT — in H1 CY 2026, while total global output declined 0.7% to 931 MT (management citing World Steel Association data: "Global steel production in H1 CY 2026 declined 0.7% YoY to 931 million tons").
• Indian crude steel output rose 7.1% YoY to 87 MT — US output grew 6.3% to 43 MT, Germany rose ~8% to 18.6 MT, and Vietnam surged 27% to 15 MT in H1 CY 2026.
• OECD outlook indicates ~71 MT of new EAF capacity planned globally through end of 2028 — management cited the OECD steel outlook as supporting long-term graphite electrode demand and justifying the company's recent capacity expansion.
• Management expects ~60 MT of new EAF capacity over FY26-27 through FY28-29 — with 20-21 MT commissioned in FY24-25 and FY25-26, and an additional 8-10 MT added in H1 FY26-27.
• Chinese steel exports eased 5.6% to 55 MT in H1 CY 2026 — but remain at elevated levels, triggering anti-dumping and safeguard duties in the US, EU, and India (management noted).
• Global steel industry utilisation is below 75% — management expects graphite electrode demand to grow driven by new EAFs in Europe and the US, with no new blast furnaces being built in those regions.

Near-Term Margin Squeeze Mitigated by Price Hikes; Utilisation Held at 90%+

• Plant operated at >90% utilisation in Q1 FY26-27 — current capacity 1,00,000 TPA; Chairman Ravi Jhunjhunwala committed to 90-95% utilisation for FY26-27, stating the company will produce "come what may."
• Needle coke prices have risen $200-300 per ton — due to Middle East disruptions and higher oil prices; impact on P&L is delayed 3-5 months, with management expecting the effect by end of FY26-27. Needle coke cost is 10-15% of total electrode cost.
• Q1 FY26-27 saw 7-8% price improvement — management had previously guided for a $300-500 per ton increase for FY26-27; current orders are booked through September-October FY26-27 at existing prices, so benefit from new hikes will begin flowing from Q3 FY26-27.
• Two global competitors announced price increases of $600-$1,200 and $930 per tonne — HEG intends to follow suit, but Q2-Q3 FY26-27 is largely booked at older prices, limiting near-term revenue impact.
• Expansion to 1,15,000 tons capacity on track for early FY27-28 — this will widen the gap versus the next largest plants (~70,000 tons). HEG's ~90% utilisation compares with Western competitors at 60-65%.
• Management targets sustaining EBITDA margins at 28-29% — including other income, despite a 10-15% increase in production cost; additional price hikes of 5-10% are expected to cover the gap.

Anode Project on Track; Bhilwara Energy Adds Scale to the Green Portfolio

• Total anode project capex guided at Rs.2,200-2,300 Cr for 20,000-tonne capacity — 40% spent as of Q1 FY26-27; majority of spending will occur in Q2-Q4 FY26-27, with ~90-95% of payments by end FY26-27 and the balance 10% in Q1 FY27-28.
• Commercial production on track for Q1 FY27-28 — first-year revenue guided at Rs.600-700 Cr at 40-50% utilisation, ramping to Rs.1,200 Cr in FY28-29 and Rs.1,500-1,600 Cr by FY29-30, with an EBITDA margin target of 35%.
• ~70% of long-term (3-5 year) contracts with tier-1 customers expected within 1.5 months — covering 70% of the 20,000-tonne capacity.
• Expansion to 30,000 tonnes (additional Rs.800 Cr) under consideration — completion by FY28-29; total capex for 30,000 tonnes at Rs.3,100 Cr, with 70:30 debt-to-equity financing (Rs.1,240 Cr already secured from SBI).
• Bhilwara Energy's debt-free 300 MW hydro plants generate Rs.320-350 Cr annual FCF — a new 75 MW hydro project (acquired from Statkraft, 30% work done) is expected by FY28-29 and a 300 MW solar project within 18 months (by end FY27-28), together adding ~Rs.200 Cr to EBITDA.
• Management targets "four-digit EBITDA" (≥Rs.1,000 Cr) from all HEG Green Tech businesses combined by FY29-30 — the Green Tech entity is projected to have gross debt of Rs.1,500 Cr as of 31 Mar 2027 (end FY26-27).

US ADD/CVD, Middle East Disruption & Trade Policy Uncertainty

• US exposure is ~10% of sales (Q1 FY26-27) — management corrected analyst assumptions of 20%. Preliminary CVD results are due by end-July 2026 and final dumping determination by end-September 2026 (both Q2 FY26-27); management states "we know that we have not done dumping."
• Confidence in redirecting volumes if unreasonable ADD/CVD imposed — management will retain the US market because US prices are higher, even if they lose some market share; alternative markets across 30 countries provide a buffer.
• Middle East share of revenue was ~20% in Q1 FY26-27 — any lost volumes from regional disruptions were diverted across HEG's other 30 country markets; utilisation remained >91% with no material volume loss.
• Key headwinds cited by management — ongoing Middle East tensions raising energy and freight costs, US tariff policy changes disrupting trade channels, and rising input costs for needle coke and other raw materials.
• Demerger scheme progressing — the composite scheme of arrangement is awaiting NCLT pronouncement; an investor call for the HEG advanced materials business will be held once the order is pronounced and a copy is received.