Everest Kanto Cylinder LtdQ2 FY23Industrial Manufacturing

Everest Kanto Cylinder Ltd

Q2 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 4

Margin

Category 3

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Revenue guidance

Category 4

→The company expects gradual improvement in sales and volumes going forward, with some growth anticipated after inventory levels at OEMs have been freed up.
→In the passenger vehicle (PV) CNG segment, breakthroughs and volume ramp-ups are expected this year, expanding beyond Maruti to other OEMs like Tata.
→The commercial vehicle (CV) segment’s CNG sales have stabilized, with make-to-order manufacturing indicating steady demand.
→Overall topline growth is expected to resume gradually after recent dips, with FY24 showing recovery day by day.
→The international markets (US and Dubai) are projected to maintain similar growth levels as the previous year.
→Capacity expansion plans are currently slowed due to market utilization but will resume when conditions improve.
→The government’s expansion of CNG infrastructure (from ~5,000 to ~16,000-17,000 stations by 2030) is seen as a key growth driver for CNG ecosystem demand.

Category 3

→The company anticipates gradual improvement in revenue and earnings as inventory at OEMs is freed up, especially noted in Q4 improvements with expectations of continued growth.
→Consolidated EBITDA margin is targeted to improve to around 14-15%.
→Standalone EBITDA margin was 11% in Q1 FY24; PAT stood at Rs. 9.6 crores, consolidated PAT at Rs. 21.8 crores.
→Capacity expansion plans are currently slowed due to market utilization levels, potentially delaying volume growth.
→Growth in the passenger vehicle (PV) CNG market is expected, with possible breakthroughs this year, supported by government infrastructure expansion of CNG stations.
→International business (Dubai, USA) is expected to see similar growth to last year, with margin at around 10%.
→Cascade business is expected to be flat in near term but with continued steady business and potential growth post FY25.
→Overall, FY24 topline growth is anticipated to gradually improve with cautious optimism on profitability increases.

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→There is no specific mention of any current or future fundraising through debt or equity in the provided transcript.
→The company discussed a CAPEX plan of around ₹40-50 crore but did not indicate plans to raise funds specifically for this.
→Puneet Khurana mentioned slowing down capacity expansion due to current market conditions, suggesting no aggressive capital raising is planned.
→The focus appears to be on managing existing operations, improving business momentum, and exploring growth opportunities organically rather than through external fundraising.

→The transcript does not explicitly mention the current or expected order book or pending orders in precise numbers.
→Puneet Khurana highlights that the company is in the process of supplying to Hyundai (PV segment), Mahindra & Mahindra, and Tata for all models, with business volume gradually gaining momentum.
→The company anticipates forthcoming growth in volume and is focusing efforts on securing amplified volume in this business sphere.
→In the CV segment, OEM inventory levels have been low as of now, with manufacturers producing mainly on a make-to-order basis.
→Overall, demand is soft with some inventory liquidation happening, but the company expects some growth and improvement going forward.
→The company is actively working on breakthrough opportunities in the PV market and aims to leverage increasing CNG penetration in the coming year.

Yes

→The company had announced some projects with a planned CAPEX of INR 40-50 crore.
→However, the timeline for capacity expansion from 0.9 million units to 1.8 million units is currently slowing down due to market conditions and low utilization levels (~55%).
→Expansion plans are delayed and slowing because current market utilization does not justify immediate capacity increase.
→The focus is on introducing new products like composite cylinders to add value and improve capacity utilization.
→No major new strategic investments were specifically mentioned beyond ongoing product development and capacity management aligned with market demand.

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