Global Materials | Industrials | Commodities

Rahul Jain

Equity Bottom-Up

<ul>
<li>Q4 FY25 delivered best operational quarter with 27% EBITDA margin and steady 80–85% utilization despite global steel demand weakness.</li>
<li>Expanding graphite electrodes to 100 ktpa, commissioning 20 ktpa anode plant by FY27, and deepening exposure via GrafTech stake.</li>
<li>Base case SOTP implies Rs614/share, valuing core at 8× EV/EBITDA and anode business at 2.5× invested capital.</li>
</ul>


Q4 FY25 delivered best operational quarter with 27% EBITDA margin and steady 80–85% utilization despite global steel demand weakness.
Expanding graphite electrodes to 100 ktpa, commissioning 20 ktpa anode plant by FY27, and deepening exposure via GrafTech stake.
Base case SOTP implies Rs614/share, valuing core at 8× EV/EBITDA and anode business at 2.5× invested capital.


HEG IN – Graphite Leader Expands into Anodes; Capacity Edge and Battery Optionality Key

Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Thematic (Sector/Industry)

<ul><li>The WTR Sustainable Index was up 1.3% W/W versus the S&amp;P 500 Index (down 0.5%), the Russell 2000 Index (up 0.1%), and the Nasdaq Index (down 0.2%).</li><li>Energy Technology (12.1% of the index) was up 4.2%, while Industrial Climate and Ag Technology (47.6% of the index) was up 0.5%, ClimateTech Mining was up 1.7%, and Advanced Transportation Solutions (21.5% of the index) was up 1.3%.</li><li>Top 10 Performers: AZRE, AEVA, GCEH, HLGN, ALLIF, PEV, SHLS, EAF, RUN, EVGO</li></ul>

The WTR Sustainable Index was up 1.3% W/W versus the S&amp;P 500 Index (down 0.5%), the Russell 2000 Index (up 0.1%), and the Nasdaq Index (down 0.2%).Energy Technology (12.1% of the index) was up 4.2%, while Industrial Climate and Ag Technology (47.6% of the index) was up 0.5%, ClimateTech Mining was up 1.7%, and Advanced Transportation Solutions (21.5% of the index) was up 1.3%.Top 10 Performers: AZRE, AEVA, GCEH, HLGN, ALLIF, PEV, SHLS, EAF, RUN, EVGO

Sustainable Investing Surveyor Focus on Neste Corporation

<ul><li>Political policies could affect markets across the spectrum.</li><li>The incoming administration’s more hawkish attitude when it comes to potentially destabilizing implementation of tariffs as a political rather than economic tool could result in greater volatility when it comes to commodity and finished goods pricing and availability, while its greater focus on domestic energy production and onshoring of supply chains could provide opportunities and lead to lower energy and logistics costs.</li><li><p>Lower energy and feedstock costs could drive margin improvement. </p></li></ul>

Political policies could affect markets across the spectrum.The incoming administration’s more hawkish attitude when it comes to potentially destabilizing implementation of tariffs as a political rather than economic tool could result in greater volatility when it comes to commodity and finished goods pricing and availability, while its greater focus on domestic energy production and onshoring of supply chains could provide opportunities and lead to lower energy and logistics costs.Lower energy and feedstock costs could drive margin improvement. 

WTR Small-Cap Spotlight Recap - Trends That Could Shape Chemicals and Materials Industries in 2025

<ul><li>WTR-CMI in 2024. Last year was difficult for specialty chemicals and materials stocks, with our WTR-CMI Index posting a rather modest 5% gain for the year, affected by &gt;40% Y/Y declines in lithium stocks.</li><li>The index’s performance was well off the pace of the Russell 2000 and S&amp;P 500, which posted returns of 10.8% and 24%, respectively, driven by the extraordinary gains of the “magnificent seven” tech and media stocks.</li><li>On a positive note, RYAM’s stock price nearly doubled during the year, driven by an <span style="font-size: var(--content-font-size);">improving pricing environment, better sales mix, and cost </span>containment efforts, as well as the ramp-up of the company’s Biomaterials business. </li></ul>

WTR-CMI in 2024. Last year was difficult for specialty chemicals and materials stocks, with our WTR-CMI Index posting a rather modest 5% gain for the year, affected by &gt;40% Y/Y declines in lithium stocks.The index’s performance was well off the pace of the Russell 2000 and S&amp;P 500, which posted returns of 10.8% and 24%, respectively, driven by the extraordinary gains of the “magnificent seven” tech and media stocks.On a positive note, RYAM’s stock price nearly doubled during the year, driven by an improving pricing environment, better sales mix, and cost containment efforts, as well as the ramp-up of the company’s Biomaterials business. 

Mat-Chem Notes - Looking Ahead by Looking Back at 2024

<ul><li>WTR-CMI last week. After the momentous US election, the stock market has rallied on expectations of lower regulations, lower taxes, and a more confrontational approach to China and other geopolitical adversaries.</li><li>Last week saw some profit taking across the market, with the Russell 2000, which we view as a better proxy for the broader market, declining 4%, with the large- cap, tech-heavy S&amp;P 500 posting a 2.1% decline.</li><li>Our WTR-CMI Index of 30 specialty chemicals and materials companies fared similarly, losing 2.2% of its value. </li></ul>

WTR-CMI last week. After the momentous US election, the stock market has rallied on expectations of lower regulations, lower taxes, and a more confrontational approach to China and other geopolitical adversaries.Last week saw some profit taking across the market, with the Russell 2000, which we view as a better proxy for the broader market, declining 4%, with the large- cap, tech-heavy S&amp;P 500 posting a 2.1% decline.Our WTR-CMI Index of 30 specialty chemicals and materials companies fared similarly, losing 2.2% of its value. 

Mat-Chem Notes - Growth Remains Elusive as Geopolitics of Battery Metals Heats Up

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.

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GrafTech International Ltd (EAF US)

HEG IN – Graphite Leader Expands into Anodes; Capacity Edge and Battery Optionality Key

Strong operational performance in Q4 FY25 with high EBITDA margin and utilization, plans for expansion and deepening exposure driving positive...

Rahul Jain

Sustainable Investing Surveyor Focus on Neste Corporation

The WTR Sustainable Index was up 1.3% W/W versus the S&P 500 Index (down 0.5%), the Russell 2000 Index (up 0.1%), and the Nasdaq Index (down 0.2%).

Water Tower Research

WTR Small-Cap Spotlight Recap - Trends That Could Shape Chemicals and Materials Industries in 2025

On the latest WTR Small-Cap Spotlight, we discussed our high-level views of the specialty chemicals and materials technology industries heading...

Water Tower Research

Mat-Chem Notes - Looking Ahead by Looking Back at 2024

Last year was difficult for specialty chemicals and materials stocks, with our WTR-CMI Index posting a rather modest 5% gain for the year, affected...

Water Tower Research

Mat-Chem Notes - Growth Remains Elusive as Geopolitics of Battery Metals Heats Up

After the momentous US election, the stock market has rallied on expectations of lower regulations, lower taxes, and a more confrontational...

Water Tower Research

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HEG IN – Graphite Leader Expands into Anodes; Capacity Edge and Battery Optionality Key

​Strong operational performance in Q4 FY25 with high EBITDA margin and utilization, plans for expansion and deepening exposure driving positive...

Rahul Jain

Sustainable Investing Surveyor Focus on Neste Corporation

The WTR Sustainable Index was up 1.3% W/W versus the S&P 500 Index (down 0.5%), the Russell 2000 Index (up 0.1%), and the Nasdaq Index (down 0.2%).

Water Tower Research

WTR Small-Cap Spotlight Recap - Trends That Could Shape Chemicals and Materials Industries in 2025

On the latest WTR Small-Cap Spotlight, we discussed our high-level views of the specialty chemicals and materials technology industries heading...

Water Tower Research

Mat-Chem Notes - Looking Ahead by Looking Back at 2024

Last year was difficult for specialty chemicals and materials stocks, with our WTR-CMI Index posting a rather modest 5% gain for the year, affected...

Water Tower Research

Mat-Chem Notes - Growth Remains Elusive as Geopolitics of Battery Metals Heats Up

After the momentous US election, the stock market has rallied on expectations of lower regulations, lower taxes, and a more confrontational...

Water Tower Research

Strong operational performance in Q4 FY25 with high EBITDA margin and utilization, plans for expansion and deepening exposure driving positive...