Grant of Renewal of Consent to Operate with enhanced production capacity, change in disposal path form CETP to ZLD & change in fuel pattern from LDO to PNG, under Red category.
EKC has enhanced capacity in Palghar unit for EMPTY HIGH PRESSURE SEAMLESS GAS CYLINDERS from 20,000 No/M to 30,000 No/M (50% growth).
It seems management is expecting good traction in demand for cylinders and further it is fruitful to note that is change in disposal and fuel patter to a more sustainable and clean energy.
EKC MPCB Palghar April 2023.pdf (180.2 KB)
it seems we will continue to import more gas than local production…
Like I had mentioned earlier international gas prices are going down. Spot Asia price is at USD 9.7 today… will go down further. US/Qatar already in talks to enter long term contracts with customers including Indian companies. These contracts should be at much lower levels than the spot price - ideally lesser than USD 4. Imported gas will become cheaper than domestic price (as per the revised formula). Demand for CNG cylinders will surge. Hope EKC is geared up for increasing capacity this time !!
graph was bullish… so the upmove today.
if company has been able to give good profits without much sales to CNG then i am sure going forward sales will jump as CNG sales have picked up.
It is just matter of time that India’s crude basket will be below USD 65 and CNG prices will go below USD 6.5… then retail CNG prices will come down…
Once US exports increase LNG market prices across will go down…
To summarize, these were the Q4 FY23 concall highlights:
- CNG Segment contributes 48% to the revenues, Industrial business contributes 26%, whereas jumbo cylinders contribute 19.8% to the revenues.
- The government has recently approved a recommendation of the Kirit Parikh panel on natural gas pricing, which includes imposition of a gas price cap. This reform has resulted in a decrease in CNG prices across the country.
- There was inventory holdback at the OEM level, but they have now started placing new orders.
- The company expects improvement in volumes and margins from Q1 FY24. They should start inching up slowly.
- The US business is more project based. But the India and Dubai business will further improve from hereon.
- There was a lot of import of cylinders from China, but management says this will not be the case going forward.
- In FY23, CNG and diesel prices almost went to par, but the spread between them is increasing (with CNG becoming cheaper). This will help in increasing CNG volumes.
- The company is making investments to introduce a new product i.e. composite cylinders.
- Company’s current market share in the CNG cylinders is 40%. The company’s current capacity utilization is 60% and is improving.
- International natural gas prices are coming down, and this will also be gradually reflecting in domestic prices.
- The company is in talks of increasing capacity on the PV side, and there could be some breakthrough on this.
Key Risk: A key risk here is that this is a cyclical business as the company’s business prospects are linked to an external factor i.e. gas prices.
A further look at the stock’s technical analysis depicts that the the stock has also rise above all the four Exponential Moving Averages (EMA) with a supply squeeze, which is a bullish signal. These indicators are truly indicating a long runway ahead!
Composite cylinders is going to be game changer. Time techno has been doing very well in composite cylinders - they have capacity shortage. EKC should have introduced this 2 years back !! Better late than never…
Company share in cng cylinders is 40%
In PV vehicles segment they are not vendors to either Maruti or Tata.
Aftermarket cng kits - I have not come across any vehicle with EKC cylinders.Mostly uber/ola drivers do this.I always check the cylinder company when trying to keep my luggage. Sample size may not be enough to reach any conclusion here though.
Where is this 40% share coming? Commercial vehicles or any Industrial uses?
They are mainly into supplying CNG Cascades.
Every CNG station should have atleast one stationary Cascade for storing the Gas.
They also used to transport the Gas through vehicles ,where direct pipeline is not available.
Generally 1 Cascade consist of 60 Cylinder.
Very disappointing results in spite of management confirming during previous con call that they are seeing uptick in demand. Issue with Promoter is that he has little understanding of what’s going on in the business. When the business had started doing well, he went on TV channels claiming major sales uptick in future and then everything came crashing down. Now, again when he gave indications that things have started improving, even Indian business is down 10% Q-o-Q
Yes managment is big issue with this company.
They planned huge capex year back and boom sales down by huge nos.They never share complete details with investors.
I exited at cost before the results.
I made this bet thinking this could do well even without great management. Incompetence to some extent was baked in, in my thesis. Why because future of gas economy will take care of everything else. Also EKC has dominating position in the market. And next generation will eventually get the grip on business.
But now I am questioning my decision. It is competence problem plus communication problem. It feels like “coming of age” may never happen to some people in politics or in business.