Are HEG latest results good or bad?

HEG's latest financial results for the quarter ending September 2025 reflect a notable operational turnaround after a challenging fiscal year 2025. The company reported net sales of ₹699.22 crores, achieving a year-on-year growth of 23.19% and a sequential increase of 13.34%. This marks the highest quarterly revenue in the company's history, indicating strong demand recovery in the graphite electrode market.
Net profit for the same quarter stood at ₹143.33 crores, which represents a significant year-on-year increase of 74.20% and a sequential growth of 36.73%. The profit after tax margin improved to 20.50%, up from 16.99% in the previous quarter, showcasing enhanced operational efficiency and effective cost management.

Operating margins remained stable at 16.93%, consistent with the previous quarter, suggesting that the company is managing its costs effectively despite the growth in revenue. However, it is important to note that a substantial portion of the profit before tax, approximately 64.08%, was derived from non-operating income, raising questions about the sustainability of these earnings.

Despite these positive indicators, HEG continues to face challenges related to capital efficiency, with average return on capital employed (ROCE) at a low 3.52% and a recent negative ROCE of -0.91%. The company's valuation metrics indicate it is trading at a premium compared to industry averages, which may necessitate careful consideration regarding future growth potential.

Overall, HEG's recent results demonstrate a recovery in operational performance, but the reliance on non-operating income and the company's valuation pose important considerations for investors. Additionally, there has been an adjustment in the company's evaluation, reflecting the mixed nature of its financial performance and market positioning.