If you are invested in a company, at least do the basic requirement of following the concalls. EKC has clearly said that the demand collapse has been on the commercial vehicle side and not on passenger vehicle side, yet everyday somebody or the other posts Maruti CNG numbers here.
Interesting read on CNG and Commercial Vehicle companies take on CNG. One can derive both positives and negatives from the above article. There is assumption that increases are in the offing in the second half of this fiscal year. “CNG prices may rise above petrol and diesel prices,” the report said.
Article 2
Where numbers of TATA Motors were shared. In CVs the details of CNG were not there however their Passenger vehicle CNG sales were at the highest to date.
However as per concall Everest Kanto was not a client of Tata Motors in PV( Q by Viraj Mahadevia pg 11 of 17). Now it’s upon the management how well the grasp the opportunity in PV segment when CV is down.
Are we aware of the contribution from City Gas Distribution for EKC? As this demand will continue to be there (albeit with its own ups & downs due to delays in project etc) and steadily grow in the next 10 years.
Did anyone attend the AGM today? Any update shared on the current business situation? Does the management see a revival in Q3 (or already in Q2 maybe)?
people have given up on promoters of this company. nevertheless sales should revive in 1 or 2 quarters and company will be back on track. sales can be revived earlier but given poor track record of the promoters it will surely take 2 quarters !!
Performance will be driven by re emergence of demand for CNG fuelled vehicles, clearly not sustainable at the earlier Mumbai price of Rs 86 per kg. Now down to 80. CNG pump infrastructure cannot be expanded in isolation, will not be viable if people stop buying CNG vehicles. The whole ecosystem has to be promoted. In all of this, what the management says is less important than what they do.
Even as the EV population grows, CNG vehicles are impacted due to rising cost of natural gas. The cost arbitrage was supposed to be a differentiator from petrol/diesel along with zero pollution. EVs have both these features. As such long term future of CNG vehicles and CNG stations looks bleak. Terminal value for any business related to CNG for automobiles needs to be reassessed. e.g vehicle tanks, CNG stations, cascades, etc.
I feel EVs are likely toast over the longer term - given that they are neither green (thermal electricity powers most of them; batteries will create a big disposal mess five years down the line) nor cost efficient (high total cost of ownership)…
I have no idea about today’s move. However, I suspect that the “40% increase in CNG out take” information shared by Confidence Petro management in an interview would have created some interest for short term traders.
I found this below news useful to assess the scenario of EKC’s growth after APM gas price revision/cap. Presently, the gas price review committee has been given time till 30th Oct to submit the report of “fair price of CNG to end customer” https://www.business-standard.com/article/companies/gas-price-hike-analysts-say-cng-prices-may-rise-by-at-least-rs-8-12-per-kg-122100300926_1.html
It looks like, the there is zero possibility to bring back the huge difference in price between CNG and diesel in near future which was enjoyed by CNG vehicle owners all these years. Though, Govt. is taking steps to review and cap the CNG prices, the producers are in no mood to accept this proposal of review committee.
Even if the price is capped, the cost price of CNG produced from ONGC and OIL is USD 6/mmBtu. Hence, we can expect the price to be capped (very unlikely scenario) at 6/mmBtu or close to that level. which is 3X the international gas price before war.
So, despite Govt. efforts, the future of CNG Vehicle demand is very bleak. Indians are in no mood to reduce pollution unless until it is mandated by Govt. So, Govt. should think out of the box to promote and achieve a sustainable 15% share of GAS in energy mix by 2030.
EKC has no moat. the management is keep mentioning Hydrogen cylinders in their future prospect. in my view, it is ok for industrial needs but for Hydrogen fueled vehicle, High Gas to cylinder weight ratio would be preferred. the steel cylinders would never give that advantage of carrying more gas with less cylinder weight.
So, EKC’s future is in Govt.'s Hand and Govt.'s ambition of achieving 15% of energy requirement by Gas by 2030 is in Europe’s hand at the moment.
Discl: Invested without research. currently at loss. This is my first ever post in this platform. please bear with my grammatical mistakes. Views/agreements/disagreements are welcome.
In vast and diverse country like India, we would have to adopt multi fuel option based on many factors like fuel availability, running cost, capital cost (cost of vehicle), regulations or lack thereof , safety, total cost of ownership, governmental inclination based on external factors like current account deficits etc etc. So in next 10 years, I expect petrol, diesel, (kerosene and heavy fuel in rural areas) flexi fuel, CNG, hydrogen, hybrid and electric vehicles running on the road simultaneously.
Hence company like EKC have role to play in this ecosystem. To what extent they would be successful depends on how nimble they are to adopt to the changing customer demand (moving from automotive to industrial, from CNG to hydrogen, from steel to composites etc)
First, the minister pushes CNG as a fuel option, drives a wider ecosystem of filling pumps across the country. Then, CNG prices are pushed up to an extent that vehicle owners are reverting to the original choice of fuel - petrol for cars, diesel for CVs. And even the aggressive plan of pump expansion is getting stalled as investing in them won’t generate adequate ROI if there’s no demand for CNG vehicles. Now, global natural gas prices are significantly lower. Shouldn’t there be some linkage?
The news articles says that Europe’s cumulative gas storage has reached around 95% of their total capacity which is enough to power their energy requirements for next 90 days. i.e. Winter season. They achieved this storage well ahead of their targeted date. that is why the international gas prices soured high during August 2022. Now, as the storage is almost full and there are number of ships queuing at many European ports & LNG floating terminals to unload the gas carried from US and middle east, the Gas will find it’s way to Asia at a cheaper rate.
Its a normal demand Vs supply scenario playing out. However, this price drop is a temporary and a bit short phenomenon. Once, the Europe’s temperatures drops below 10 deg, the usage increase and again price may go up.
India has no other choice to bring down the gas price other than increasing the local production of gas but it will come at a cost which normal people would find it difficult to afford. Govt. has to think out of the box to attract investments in future and to make sense of already invested amount in Gas based economy.
CNG vehicles are lower in demand due to high LNG/CNG prices. LNG prices have already corrected from USD 9 to USD 6. Coming down faster than crude and will go down even more to USD 3 in a few months. Supply of LNG is increasing in US and other countries. By Q3 /Q4 prices will be back to last year levels and going forward when new fields in Middleast are commissioned prices will go down even lower. Even ONGC and Reliance are ramping production in KG basin.
It seems very few people attend EKC investor calls.
In short some key points:
Sales should be maintained at these levels - based on demand from industrial segment, and destocking of CNG vehicles and hence new orders as some sales of CNG vehicles will happen.
Margins could increase on account of fixed cost reduction and reduction in steel prices.
US and Dubai subs will do much better as demand has picked up.
My take - If the above happen then the annual EPS should be around 8 to 10 based on which the price should be 100-125.
Mr. Khurana also mentioned - If the international prices of LNG come down then demand of CNG vehicles will pick up which will increase the utilisation of plants from current 50% and increase in sales and margins.
My take - LNG prices have already come down a lot but still much higher than last year. LNG prices will correct further as and when supply increases (from countries apart from Russia) and when more transport vessels are available (price increase is also due to shortage of vessels) once Europe is done with stocking for winters. Alternate sources of energy like coal, biomass/ wood, etc will also reduce burden on gas.
So it is just a matter of time that demand will pick up again and the gas story will be back. but till then it is just wait and watch.
Overseas expansion:
Hungary JV is on hold due to Russia Ukraine conflict and high gas prices.
Egypt is going ahead but regulatory approvals are awaited.
Not much investment has been made in these JVs.
Promoter loans:
One of the investors pointed out that all of the negative things are external and nothing can be done by the company. But paying off the promoter loans is within the control of the management !! so why not use the cash and reduce the interest burden.
This was a very valid point. lets see what the company does.
Disclaimer - All of above is personal opinion and not construed as advice.
