Here the question is not whether they can scale up or not it is about corporate governance and integrity of the promoter
Once that comes into question all other parameters does not matter for long term investment
But also there could be more risk to reward ratio from this point that is left to individuals point of view.
No reply for any email from the management
Call tommorrow at 3 pm https://www.bseindia.com/xml-data/corpfiling/AttachLive/4b34b566-47a1-43b9-9409-7e762d7f84e4.pdf
Notes from concall:
Regards the penalty : Non reoccurring. They have provisioned for it since they did not want to fight the client in court etc since the client continued to give them good business. So the loss hasn’t happened yet… Will happen soon and hence provision made. Hence why tehy couldn’t tell us about it back in December
USA business: I think they misunderstood the question regards losses a bit. But basically outside India subsidiaries are project oriented. So can’t just look at one quarter in isolation. USA will be flat next quarter too but not as bad as this.
Will q3 be the worst quarter? : With prices of cng cooling down they expect an immediate turnaround. Could be another price decrease in march/April but a lot depends on global macros and government
Misc notes:
Long term cng prospects are good and infra is continuing to be developed even with cng prices high.
When asked about promoter buying at this price they chose not to comment.
Cng and industrial were at 50 percent each contribution this quarter.
With Capex done and with utilisation around 60 there is room for growth when macros improves.
End of concall(a very brief 26 mins).
Overall, I’m just glad management isn’t hiding. Q4 should be a marginally better quarter. As cng prices cool we should see a huge improvement overall.
Disc: Invested around these levels. Increased my stake today when management came out of hiding. Not a sebi advisor
@ap1990
I have not been tracking the Co. closely after I exited in August, a couple of days too late!
I’m not sure if the pre Russia-Ukraine conflict demand will return the moment the CNG prices recede, though it could pick up gradually. The confidence in the product may have been dented a great deal. Potential customers could be put off by the thought of rising CNG prices every time there are geo political tensions that may or may not worsen. Its a fast changing dynamic world where things never get back to the earlier normal as the environment around changes all the time.
That said, the share price has corrected so much that it hurts to exit now, but to be honest, it had hurt as much in August when I had exited with all the gains wiped out, but at least one was able to redeploy the funds. I would probably have done the same today, which is not to say that the price cannot go up, but having exited, I can view the situation more objectively. Losses don’t happen when we sell, they happen when the price falls! Having said so, to each his own
The promoters too have not exactly crowned themselves in glory!
In July 2021, natural gas was around $ 4, CNG prices in Mumbai were less than Rs 50 per kg. Now, natural gas is down to $ 2.20 but CNG is being sold at Rs 87. If there has been under recovery in the past, how long will the marketing companies continue to give themselves this extra boost?
The APM gas contribute to 90-95% of input gas for CGD players ( It include Domestic Household + CNG & exclude Industrial & commercial)
It’s domestically produced gas.
APM gas prices calculated based on last quarter gas prices in USA, Canada, Europe & Rusia and due to geo-political tension the prices on above country is continuously increasing hence APM gas price has also increased and trend is as below-
On 31/03/22- 2.9$/mmbtu
From 01/04/22- 6.6$/mmbtu
From 01/10/22-8.57$/mmbtu
Around 200% rise in 6 month.
CGD players also increased the gas prices to pass on the input hike and the gap between CNG & Petrol, Diesel is at historical low which consequently dropping the conversion rate of vehicle.
The government has set a target to increase the share of natural gas in the country’s energy mix to 15 % by 2030 from the current around 6.3%.
To achieve it, few days back Government had formed comittee under Kirit Parikh to look after APM gas pricing mechanism and they come with following Recommendations:
APM will have a floor procs of $4/mmBtu and a cap of $6.50/mmBtu. The cap will rise by $0.50 every year and deregulation of APM gas pricing by January 2027.
If it implemented APM gas prices will be reduced and consequently CNG prices will be reduced.
I listened to the concall today. What didn’t get clarified is why non-fulfilment of terms agreed in the contract occurred, leading to penalty. This reflects poorly on the execution especially during times when business isn’t running at peak capacity.
Price seems to have bottom our after concall.
It didn’t corrected much on red days and up moves were high when market was in green.
If any technical guys could help with this ?
On Monthy TF, i think it is self explanatory.
TradingView Chart — TradingView
There is possibility that stock might consolidate and rally from here. However if the stock breaks below 65 levels, I would sell and exit my complete position.
Now natural gas is down to $ 2.05 but Mahanagar Gas continues to sell CNG at close to the highest ever prices. Is there anything I’m missing here?
When natural gas prices went up 5 times post covid, did these company increase the prices to customers by 5 times? NO
They took a hit in their margin.
Now when the tables have turned, they will benefit from it.
neither is true. USD 2 is price in USA. Price in Asia is USD 12.5. USA does not have export infra as of now to export more thats why price is low. Over next few months they will increase exports then US prices will increase and Asia price will decrease.
Price in Asia has come down from USD 60 to USD 12.5 so CNG price in India should come down in April. Asia prices should down to USD 5 to 6 in few months. CNG will be much cheaper than diesel.
by FY 24, LNG production in Qatar will more than double leading to further decline in LNG/CNG prices.
Hope EKCL is able to take advantage of surge in demand… unfortunately they are not present in lucrative segments like passenger vehicles !!! wonder what is stopping them…
Even if they continue doing whatever they are doing, sales & profits will back to March 22 levels and EPS of INR 25. If they set up the new plant for which land was bought… it could be higher… the story is back !!
Now the revisions will be made every month, hope to see further reduction going ahead
It will reduce only when crude oil prices fall below 65$/barrel else CGD will get it cap price of 6.5 $/mmbtu
International gas prices will go below the cap of USD 6.5 in a few months. Large supply is expected from US and Qatar. Other countries like australia also increasing production.
Watch this 1.5 min video, Mr Parikh has clarified on this point.
Current spot rates in Asia is USD12.5. Price in USA is USD 2. If you add USD 4 for gasification/ re gasification/ transportation price should be USD 6.
Landed cost of Gas from Qatar will be lesser than USD 4 by next year when production increases.
