Shares of graphite electrode firms Graphite India and HEG jumped over 6 percent each after global brokerage house Jefferies raised the target price for both the firms while maintaining a 'buy' stance on the stocks.
Jefferies increased HEG's target price to Rs 1,400 from Rs 868.40 while the target of Graphite India has been raised to Rs 340 per share from Rs 290 earlier.
Post this, HEG rallied 6.6 percent to Rs 925,80 per share in intra-day deals while Graphite India surged as much as 6.2 percent to its day's high of Rs 306.30 on BSE.
In the report, Jefferies noted that there is a high correlation with steel demand for graphite electrodes and the steel demand and price have improved significantly on a QoQ basis.
This has also led to Indian metal stocks entering an upward cycle after two weak years, stated the brokerage.
Jefferies also raised FY22-23 EPS for Graphite India and HEG by 16-40 percent and added that despite a 25-60 percent rally in just one month, the valuations of both firms remain undemanding.
For Q2, Graphite India reported a net loss at Rs 41 crore down 122.16 percent from Rs 185 crore in September 2019. Its net sales stood at Rs 485 crore, down 45 percent from Rs 882 crore in the year-ago period.
Meanwhile, HEG reported a 680 percent rise in net profit of Rs 889 crore in Q2 as compared to a Rs 114 crore profit in the year-ago period. Its revenue rose 338 percent to Rs 1,794 crore in the September quarter compared to Rs 410 crore in the corresponding quarter in the year-ago period.