HEG Ltd. — Investor Presentation 2018

Nov 5, 2018

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VIVEK C

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Digitally signed by VIVEK C DN: c=IN, o=Personal , CID - 5029066, 2.5.4.20=4c0c71283fa87eec7d03238e0ab0d0a67aed774cc883cc5cae01584d30a2c876, postalCode=201014, st=Uttar Pradesh, serialNumber=c9c9f621cfb0612b978b3b8176f8113a6f3fbe0f300e9aab2e92fc21d8fbda01, cn=VIVEK C Date: 2018.11.05 12:41:40 +05'30'

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Q2 of FY19 Investor Update Presentation

HEG Ltd © LNJ Bhilwara Group

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HEG is part of LNJ Bhilwara group a diversified, reputed and large Indian business house having more than five decades of industrial experience and presence in

Power Generation & Power Consultancy

Textiles

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Graphite Electrodes
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IT Enabled Services

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HEG Ltd © LNJ Bhilwara Group

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HEG Limited – Profile

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• HEG Limited is a leading graphite electrode manufacturer & exporter Globally

• The company produces two grades of graphite electrodes ‐ Ultra High Power (UHP) & High Power (HP) ‐ used in

• producing steel through the Electric Arc Furnace (EAF) route.

• Exports approximately 70% of its production to about 30 countries around the world.

• Diversified customer portfolio –supplying large proportion of our volumes to top 20 steel companies of the

world.

• Graphite electrodes manufacturing plant (capacity of 80,000 tons per annum) located at Mandideep in Madhya

Pradesh ‐ is the largest single‐site facility in the world

• Captive power generation capacity of around 76.5 mw (2 thermal power plants & 1 hydro power plant)

HEG Ltd © LNJ Bhilwara Group

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World’s Largest Single Site Graphite Electrode Plant

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HEG Ltd © LNJ Bhilwara Group

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R&D Center

• R&D set up to corroborate the Quality & Improvement Drives with small scale production facilities

• The focus is also on development of new product lines

• Development is focused towards Carbon

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Capacity Build Up

Graphite Electrode

(In '000 tonne)

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120
100
100
80
80
66
60 52
40
30
20 14
0
1990 2002 2006 2009 2011 2020
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Captive Power (MW)

(In '000 tonne)

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120
100
77 77 77
80
60
44
40
20 14
0
2002 2006 2009 2011 2020
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Probable

HEG Ltd © LNJ Bhilwara Group

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Graphite Electrode (GE) Industry – Our Unique Strengths

• GE‐ An indispensable material for Electric Arc Furnaces (EAF) for Steel production

• EAF accounts for appx 45% of total World Steel Production (Without China)

• High Entry Barrier – HEG the last new entrant in the world ‐1977

• Uses 100 % Captive Power

• State of the art manufacturing facility – due to constant expansions & investments

• Capable of producing 100% UHP Electrodes

• Facilities suitable for manufacturing up to 32” electrodes

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HEG Ltd © LNJ Bhilwara Group

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Anti‐pollution Campaign‐ Blue Sky Policy

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• This the of the restriction will be more & strict . & have been year application rigid

• advanced from 1 Oct to 31 Mar compared to 15 Oct to 15 Mar last year

• Export of Steel is likely to keep falling in near future.

• China likely to add around 200 million tons scrap per annum for the next few years.

• In order to discourage export of scrap they have imposed a 40% export duty

• Central Government has given limits on Environment and if limits are breached Governors

will be removed .

• 50% of Chinese steel is produced within 700‐800 kms radius of Beijing

HEG Ltd © LNJ Bhilwara Group

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Anti‐pollution Campaign‐ Blue Sky Policy

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• 2017 environment control was not very serious being first year , allowed 60‐65% capacity utilization against 50% orders. but this year it will be much more stringent & the impact may be higher.

• Last Environmental affected 28 cities within China this more than 80 year Policy year

• cities may be affected.

• EAF carbon emissions is 86% less than BOF gas & 72% less than BOF solid gas.

• China’s Hebei Province Gets Tough on Steel Mills to Meet Low Emissions Targets until

• 31 Oct’18 ,in case of failure to meet the targets companies will be ordered to shut down.

• Two Chinese Cities of Hebei Province Set to Observe 50% Production Cuts during

• Winter Heating Season

HEG Ltd © LNJ Bhilwara Group

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7.4
Chinese Steel Exports Further Down 11 % Y‐o‐Y Jan‐Sep’18
Jan
4.7
Feb 5.8 CY17
4.9
CY 18
112 7.6
Mar
5.7
108
6.5
Apr
6.5
7.0
May
6.9
93
6.8
China Steel Exports Jun
6.9
(MT)
7.0
Jul
5.8
76 6.5
Aug
5.9
70 5.1
Sep
6.0
5.0
Oct
Annualized based on 8 months actuals
Monthly Chinese Exports in MnT
CY-14 CY-15 CY-16 CY-17 CY-18 (e)
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HEG Ltd © LNJ Bhilwara Group
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WORLD STEEL SCENARIO (JAN‐SEPT) 2018, MMT

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Crude Steel Production World	% Change 2016 vs.2015 ‐0.9%	% Change 2017 vs.2016 5.3%	(Jan‐Sept) 2018 1347	% Change (Jan‐Sept ) 2018 vs. 2017 4.7%
China	‐2.0%	5.7%	699	6.1%
World without China	0.2%	4.9%	648	3.3%

Growth Areas	% ↑	% of world pdn
Middle East	13.4	2.0
Africa	7.8	0.8
Asia	5.5	70.3
N. America	3.4	6.7
S. America	2.5	2.5
CIS	1.8	5.7
EU	1.3	9.5

India produced 79 mmt steel posting a growth of 6.1%

HEG Ltd © LNJ Bhilwara Group

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GE Outlook 2020

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HEG Ltd © LNJ Bhilwara Group

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in Rs. Crore(except EPS)

Financial Snapshot

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	Q2 FY19	Q1 FY19	Q2 FY18	FY18
REVENUE FROM OPERATION	1794	1587	410	2758
EBITDA*	1389	1197	192	1734
EBITDA Margin	76.57%	75%	46.66%	63%
EBIT	1371	1180	174	1661
EBIT Margin	76%	74%	43%	60%
PAT	889	770	114	1081
PAT Margin	50%	49%	28%	39%
EPS	222.45	192.77	28.44	270.61

• EBITDA includes Other Income

HEG Ltd © LNJ Bhilwara Group

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Segmental Performance – Graphite Electrodes

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in Rs. Crore

	Q2 FY19	Q1 FY19	Q2 FY18	FY18
Net Sales	1793	1587	407	2739
Export(% of sales)	72%	69%	63%	71%
EBITDA Margin	77.20%	75.30%	42.36%	61%
EBIT Margin	76.37%	74.40%	38.68%	59%

• Capacity utilisation at around 85% during the Quarter.

• Realizations on QoQ basis are higher in Q2 vs. Q1 FY 19

 USD/INR favorable, as graphite electrode business is net exporting segment.

HEG Ltd © LNJ Bhilwara Group

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Segmental Performance – Power in Rs. Crore Q2 FY19 Q1 FY19 Q2 FY18 FY18 Net Sales 28.85 27.88 54.56 213.80 EBITDA Margin (16)% (6)% 36% 28% EBIT Margin (26)% (18)% 30% 23%	Segmental Performance – Power in Rs. Crore Q2 FY19 Q1 FY19 Q2 FY18 FY18 Net Sales 28.85 27.88 54.56 213.80 EBITDA Margin (16)% (6)% 36% 28% EBIT Margin (26)% (18)% 30% 23%	Segmental Performance – Power in Rs. Crore Q2 FY19 Q1 FY19 Q2 FY18 FY18 Net Sales 28.85 27.88 54.56 213.80 EBITDA Margin (16)% (6)% 36% 28% EBIT Margin (26)% (18)% 30% 23%	Segmental Performance – Power in Rs. Crore Q2 FY19 Q1 FY19 Q2 FY18 FY18 Net Sales 28.85 27.88 54.56 213.80 EBITDA Margin (16)% (6)% 36% 28% EBIT Margin (26)% (18)% 30% 23%	Segmental Performance – Power in Rs. Crore Q2 FY19 Q1 FY19 Q2 FY18 FY18 Net Sales 28.85 27.88 54.56 213.80 EBITDA Margin (16)% (6)% 36% 28% EBIT Margin (26)% (18)% 30% 23%
	Q2 FY19	Q1 FY19	Q2 FY18	FY18
Net Sales	28.85	27.88	54.56	213.80
EBITDA Margin	(16)%	(6)%	36%	28%
EBIT Margin	(26)%	(18)%	30%	23%

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1. Coal availability under FSA with Coal India acutely short. Sourcing of coal from open market adversely affecting bottom line.

2. Net sales reduced in Q1 and Q2 of FY 19, as company has been able to negotiate a win win deal with state electricity board since Feb 2018. Hence, own generation reduced due to commercial reasons.

3. Power generated by coal based power plants fully used for captive use in graphite making. The pricing of the captive usage is done equivalent to supply from state electricity board. With improved terms of sourcing from state electricity board, power generated from this source is expensive for now.

HEG Ltd © LNJ Bhilwara Group

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Thank You

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Ms Dimple Momaya heg@adfactorspr.com

+91 98207 62036

Mr.R.Rustogi, CFO & COO Mr. Gulshan Sakhuja, DGM-Corp.Finance HEG Limited

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Ph: +91 9910103865 Fax: +91 120 254 1575 Email: r.rustogi@lnjbhilwara.com gulshan.sakhuja@lnjbhilwara.com

HEG Ltd © LNJ Bhilwara Group

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