Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

GrafTech International Ltd / Equity Bottom-Up

<ul>
<li>Since our first bullish note on  <a href="https://www.smartkarma.com/entities/graftech-international-ltd" target="_blank" data-smartkarma-citation="entities:27124:1" rel="noopener">GrafTech International Ltd (EAF US)</a> the stock is down -31% due to softer ASP's and cost inflation. We believe these headwinds will persist.</li>
<li>Deleveraging continues with net debt declining from 1.1 bn to 865 mn USD YoY, but the pace has slowed due to negative working capital changes resulting in lower OCF. </li>
<li>Factoring in a 12% drop in ASP YoY, the stock trades at 6.3x FY23 and 4.7x EV-EBITDA, pushing our thesis of debt deleveraging/capital return further out.</li>
</ul>


Since our first bullish note on  GrafTech International Ltd (EAF US) the stock is down -31% due to softer ASP's and cost inflation. We believe these headwinds will persist.
Deleveraging continues with net debt declining from 1.1 bn to 865 mn USD YoY, but the pace has slowed due to negative working capital changes resulting in lower OCF. 
Factoring in a 12% drop in ASP YoY, the stock trades at 6.3x FY23 and 4.7x EV-EBITDA, pushing our thesis of debt deleveraging/capital return further out.


Graftech: Headwinds Persist from Cost Inflation and Soft Pricing Guidance

<ul>
<li>
<a href="https://www.smartkarma.com/entities/graftech-international-ltd" target="_blank" data-smartkarma-citation="entities:27124:1" rel="noopener">GrafTech International Ltd (EAF US)</a> reported solid results for Q1 2022. The stock still continues to look cheap at 4.7x FY22 PE.</li>
<li>The debt deleveraging target of 400 mn USD a year seems on track, and the company will be zero debt by FY23. FCF yield is 24% at the current price.</li>
<li>The company also bought back 30 mn USD of stock (3 mn shares @9.88 USD/share representing 1.1% of the outstanding shares) in Q1 2022. </li>
</ul>



GrafTech International Ltd (EAF US) reported solid results for Q1 2022. The stock still continues to look cheap at 4.7x FY22 PE.
The debt deleveraging target of 400 mn USD a year seems on track, and the company will be zero debt by FY23. FCF yield is 24% at the current price.
The company also bought back 30 mn USD of stock (3 mn shares @9.88 USD/share representing 1.1% of the outstanding shares) in Q1 2022. 


Graftech Q1 2022: Debt Deleveraging Continues, LTA Pricing Overhang An Issue

<ul>
<li>
<a href="https://www.smartkarma.com/entities/graftech-international-ltd" target="_blank" data-smartkarma-citation="entities:27124:1" rel="noopener">GrafTech International Ltd (EAF US)</a> results for Q4 2022 were worse than expected, and guidance for volumes down 50% in H1 2023e was shocking.</li>
<li>In summary, our intrinsic value was too aggressive, and there was a low margin of safety on the investment. Constant execution issues in a favorable environment didn't help our cause.</li>
<li>The stock isn't as cheap when trading at 11.1x/9.5x FY23e/FY24e. The deleveraging story now gets pushed out to the end of FY25. The investment is dead money for two years.</li>
</ul>



GrafTech International Ltd (EAF US) results for Q4 2022 were worse than expected, and guidance for volumes down 50% in H1 2023e was shocking.
In summary, our intrinsic value was too aggressive, and there was a low margin of safety on the investment. Constant execution issues in a favorable environment didn't help our cause.
The stock isn't as cheap when trading at 11.1x/9.5x FY23e/FY24e. The deleveraging story now gets pushed out to the end of FY25. The investment is dead money for two years.


Graftech: Deleveraging Story Moves Out Even Further / Dead Money

<ul>
<li>
<a href="https://www.smartkarma.com/entities/graftech-international-ltd" target="_blank" data-smartkarma-citation="entities:27124:1" rel="noopener">GrafTech International Ltd (EAF US)</a> thesis has taken a turn for the worse with the suspension of the operations in Mexico (impact 50% of production in Q4 2022/H1 2023). </li>
<li>The negotiations of LTA pricing ( based on spot pricing ) in the near term also prove to be a headwind, with spot prices 40% below the contract. </li>
<li>At 7.3x PE FY23 (earnings down 60% YoY), the stock price reflects these challenges. The recovery for the company to normalized cash flow levels will take much longer.</li>
</ul>



GrafTech International Ltd (EAF US) thesis has taken a turn for the worse with the suspension of the operations in Mexico (impact 50% of production in Q4 2022/H1 2023). 
The negotiations of LTA pricing ( based on spot pricing ) in the near term also prove to be a headwind, with spot prices 40% below the contract. 
At 7.3x PE FY23 (earnings down 60% YoY), the stock price reflects these challenges. The recovery for the company to normalized cash flow levels will take much longer.


Graftech: Operational Issues Plague Thesis

<ul>
<li>
<a href="https://www.smartkarma.com/entities/graftech-international-ltd" target="_blank" data-smartkarma-citation="entities:27124:1" rel="noopener">GrafTech International Ltd (EAF US)</a> Q4 2021 results demonstrated the company is well on track to an FY22 profit of over 520 mn USD, implying a 5x PE. </li>
<li>Debt deleveraging remains a powerful theme in the story. With an average debt reduction of 400 mn USD a year, the company will be close to zero debt by 2023. </li>
<li>We believe the company will also use its cash to buy back stock ( 159 mn USD authorized buyback or 6% of market capitalization ) and pay dividends. </li>
</ul>



GrafTech International Ltd (EAF US) Q4 2021 results demonstrated the company is well on track to an FY22 profit of over 520 mn USD, implying a 5x PE. 
Debt deleveraging remains a powerful theme in the story. With an average debt reduction of 400 mn USD a year, the company will be close to zero debt by 2023. 
We believe the company will also use its cash to buy back stock ( 159 mn USD authorized buyback or 6% of market capitalization ) and pay dividends. 


Graftech: Encouraging Q4 2021, Stronger Pricing into 2022

United States

GrafTech International Ltd. manufactures and provides natural and synthetic graphite and carbon based products and services. The Company offers graphite electrodes, petroleum needle coke, crystalline form of carbon, and energy solutions for manufacture of steel, aluminum, silicon metal, automotive products, and electronics. GrafTech International serves customers worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

GrafTech International Ltd (EAF US)

Graftech: Headwinds Persist from Cost Inflation and Soft Pricing Guidance

Graftech is a play on the graphite electrode industry. Trading at 6.3x FY23 PE and 4.7x EV-EBITDA, the company is a debt deleveraging and capital...

Sameer Taneja

Graftech Q1 2022: Debt Deleveraging Continues, LTA Pricing Overhang An Issue

Graftech is a cheap stock trading at 4.7x PE. Debt deleveraging target of 400 mn USD a year is on track, and the company will be zero debt by FY23....

Sameer Taneja

Graftech: Deleveraging Story Moves Out Even Further / Dead Money

Graftech stock isn't as cheap when trading at 11.1x/9.5x FY23e/FY24e. The deleveraging story with the Monterrey incident gets pushed out to the end...

Sameer Taneja

Graftech: Operational Issues Plague Thesis

At 7.3x PE FY23 (earnings down 60% YoY), Graftechs stock price reflects its production challenges. The stock could be dead money with no resolution...

Sameer Taneja

Graftech: Encouraging Q4 2021, Stronger Pricing into 2022

Trading at 5.4x FY22, Graftech is a play on the shift to greener EAF steel production and superior capital allocation in the form of buybacks and...

Sameer Taneja

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)