Everest Kanto Cylinder Limited (EKC.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the earnings conference call of Everest Kanto Cylinder Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mitesh Jain from CDR India. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and thank you for joining us on Everest Kanto Cylinder's Q2 FY '26 Earnings Conference Call. We have with us today Mr. Puneet Khurana, Managing Director; and Mr. Sanjiv Kapur, Chief Financial Officer of the company. We will initiate the call with opening remarks from the management, following which we will have the forum open for a question-and-answer session. Before we begin, I would like to state that some statements made in today's call may be forward-looking in nature and a disclaimer to this effect has been included in the results presentation shared with you all earlier. I would now request Mr. Puneet Khurana to make his opening remarks. Over to you, Mr. Khurana.

Thanks. Good evening, everyone, and thank you for joining our earnings call. I will begin by sharing our overview of performance for the quarter followed by the Q&A session. In Q1 FY '26, we delivered a steady performance. Consolidated revenue stood at INR 360 crores, and EBITDA was at INR 42.9 crores, translating to a margin of 11.9% PAT for the quarter was INR 13.7 crores. On a stand-alone basis, revenue stood at INR 223 crores, and the margin improved to 11.2% compared with 9.3% the same period last year. During the quarter, the CNG segment in India was impacted by GST transition in the end-user automotive industry, which led to a short-term softness in the volumes. This has since normalized and the underlying domestic demand environment in the segment remains positive. Our Industrial segment continues to perform in line with expectations. In our international operation, the U.S. business reflects the order-driven nature of the market, while dispatches were lower during...

Sorry to interrupt, sir, you are not audible. Ladies and gentlemen, line for the management has disconnected. Please wait while we reconnect them to the conference. Ladies and gentlemen, thank you for patiently holding. We have the management line reconnected. Over to you, sir.

During the quarter, the CNG segment in India was impacted by GST transitions in the end user automotive industry which led to a short-term softness in volumes. This has since normalized and the underlying demand...

Ladies and gentlemen, the line for the management is again disconnected. Please stay connected while we reconnect them to the call. Ladies and gentlemen, thank you for patiently holding. We have the management line reconnected. Over to you, sir.

Yes. Sorry for that. Thanks for your patience. On the expansion front, we are making steady progress on new facilities in Mundra and Egypt. The Egypt plant is preparing to begin trial production shortly and the work at Mundra continues to be at advance as planned. Both facilities remain on schedule and will significantly enhance our manufacturing capabilities in the coming year, enabling us to serve a wider range of domestic and international opportunities. With growing opportunities across clean energy and industrial applications, coupled with great visibility in our order pipeline, we remain confident about our future growth perspectives. Our focus remains on operational excellence capability -- capacity development and supporting customer across geographies, as we build for the next phase of growth at EKC. With that, I conclude my opening remarks and request the moderator to open the floor for questions.

[Operator Instructions] First question is from the line of Ashit R. Kothi and Individual Investor.

Sir, just would want to understand more on hydrogen. I mean, say, the next major fuel, which is being considered as in hydrogen. So how are we based on that? And if EV vehicles are going to take a center stage, in that scenario, where does our CNG business would stand.

So hydrogen development in India has already started. Government is giving a lot of push on hydrogen. We have projects from companies like and IOCL and HPCL. So there are some projects going on in hydrogen. And definitely, it will be coming as a mobility fuel in the future. But this future is -- it will take time because the entire ecosystem needs to be set up, and all the stakeholders need to come together. So it's looking positive, but it's early days for hydrogen now today.

So we don't expect anything much happening on that front for next couple of years?

Yes, yes. But it's looking good, and hydrogen will be complementary to us. So the faster it comes better because, again, hydrogen storage is at very high pressure and cylinders are required there. So definitely a very positive thing for us is the faster it comes.

In this case, what will be our growth drivers for the next couple of years?

So our growth driver, of course, CNG continues to be a growth driver, plus Industrial business also is growing. So many, many new applications for industrial gases is coming up. So we are seeing many, many new avenues, growing defense sector is growing. So there's lots of avenues that we see the future of growth.

Any specific area where you would want to -- you would be concentrating, sir?

I mean, we are concentrating on CNG and industrial. We are concentrating both on these sectors because they're growing. So definitely, we continue to focus on these sectors.

[Operator Instructions] Next question is from the line of Garvita from Seven Island PMS.

I have a few questions. One of them is, could you give a rationale why is the gross margin fall in this quarter from last -- compared to last quarter?

So the CNG bit of the business was a little down. So that's where the volumes have dropped.

Okay. And sustainable would be for the year?

Yes, definitely, it will pick up. It's picking up as we speak. So it will definitely improve.

Any margin guidance can you give me, sir?

The margin guidance. Yes, about 12% to 14%.

That will be the EBITDA margin, right?

Yes.

And sir, could you give me guidance for the revenue also top line and volume guidance?

Revenue. I think revenue should be okay for the -- you look at it over the period of the whole entire year. So I think it should be -- is okay as for what we've targeted.

That would be how much, sir?

INR 900 crores to INR 2,000 crores in standalone.

So could you highlight a little bit on the 2 plant expansion, how far we have come on those and how much CapEx we have already recurring? How much is planned to be incurred for both plants? And by when, are we expecting the commercialization of Egypt and Mundra plant?

So Mundra, we have, we've spent around INR 130 crores, and we have a balance of INR 30 crores. And Egypt, we've spent around INR 86 crores, and the balance is around INR 40 crores.

By when are we expecting the commercialization of the plants?

So Egypt will be happening very soon, maybe by January.

Okay January '25, '26, sorry. And the Mundra plant?

End of March. Maybe by March.

Okay. And we have positive outlook for the coming 2 years, right?

Yes, yes. Of course, yes. yes.

A major growth driver, if you can name like -- I understand hyrdrogen is one of the markets we are looking at. What else is going to be the major driver for is, sir?

I think the CNG segment continues to grow. And in the industrial gases, there are a lot of new segments coming up like semiconductor and other things. Definitely, there's going to be growth coming from those areas, solar, semiconductor, yes.

Next question is from the line of Reet Jain from First Water.

Good afternoon, sir. I want to know what is the order book for U.S.A. subsidiary? And what is the executable -- what is the order book for U.S.A. subsidiary and the execution time?

So U.S. is around $80 million. And what is the execution time? 12 to 18 months.

And any update on the GST case that was there last year?

GST case? Yes, we are still -- we made some representations to the government. Yes. And we are hoping some positive replies from them soon.

But any time line like when it will be resolved?

Yes. I mean the is very difficult to put a time line on these things. But we are quite confident we have a strong case, we are, hopefully, things should be okay.

Because I read somewhere that not only you, other players have also received the GST order.

Of course, they will, yes. Everybody will who has in the industry will receive it.

Okay. And in the start of the call, you said that you are doing something in defense. So can you just explain the opportunity? And who are the -- I mean, what exactly we are making there?

So we have been catering to defense sector since a long time and a lot of projects are within the pipeline. So I'm not able to share those details, but just to let you know that it's looking positive for us, that segment, yes.

Sir, do we have orders for them?

I mean no, we have orders for that.

And sir, I mean, are there any competitors for the defense in our segment?

Of course, there are competitors in every sector. But in some areas, maybe there is no competition in some areas, there might be competitors.

Okay. Because I'm asking this because to enter into defense, there is a long gestation period. So that's ...

Yes. That's true.

And one more thing, your employee costs rose from INR 36 crores in the same quarter previous year to INR 43 crores now. So can you just comment on that, why the increase?

So the other thing is that, of course, as we expand into new product line plus increment, so all these things have probably given this rise.

Next question is from the line of Vidhi Shah from CR Kotari and Sons Stock Broking.

So for stand-alone business currently, may I know what is your utilization rate?

70%.

Okay. And so currently, we are doing 70%, INR 948 crores of revenue. So is this a peak utilization that we can expect? Or can we expect this to go up utilization?

It can definitely go up. Yes. It's only 70%. So at least, I think 20%, we can go up.

Okay. So that's for increasing from current to further 80% potentially?

Yes.

Okay. And sir, from the UAE plant, what is the current outlook since in the past, it wasn't doing well. So what is the future outlook?