Key highlights from Everest Kanto Cylinder Limited (EKC) Q4 FY23 Earnings Concall
Q&A Highlights:
- [00:05:49] Deepan Sankara Narayanan at TrustLine asked that with the implementation of Kirit Parikh recommendation, if it increases confidence of truck owners using CNG as primary fuel. Puneet Khurana MD said it will surely give good confidence to truck owners as new orders have been coming in.
- [00:06:04] Deepan Sankara Narayanan at TrustLine also asked when EKC expects improvement in its domestic sales volume and margins. Puneet Khurana MD said that margins in India business dropped QonQ due to some old inventory that EKC was carrying. The company expects to see improvement in sales and volume going forward.
- [00:07:09] Deepan Sankara Narayanan at TrustLine asked if the run rate of substantial improvement of US and Middle East business’ sales and margin is sustainable going forward. Puneet Khurana MD clarified that a lot of order book was pushed out in the US. However, Dubai and India margins are sustainable as it’s been showing.
- [00:08:28] Bhavesh Chauhan from IDBI Capital enquired if China’s cylinders are gaining market share than Indian players in India. Puneet Khurana MD answered that the import surge was after COVID, but there is enough capacity now in India that these imports are going to decline or won’t impact the local production in India.
- [00:09:40] Bhavesh Chauhan at IDBI Capital asked about demand on the CNG side. Puneet Khurana MD said that CNG demand is starting to pick up as the OEMs have lot of inventory that’s being cleared.
- [00:10:46] Bhavesh Chauhan at IDBI Capital also enquired about EKC’s expansion plans. Puneet Khurana MD answered that EKC is expanding its product line to include new products, but the expansion of its existing capacity is progressing slowly. The company is waiting for the market to rebound before accelerating the expansion.
- [00:11:34] Darshil Jhaveri from Crown Capital asked about the outlook for FY24. Puneet Khurana MD said that anything can happen. There could be a sudden sales fall as it happened earlier and if CNG prices are corrected then same momentum could begin.
- [00:20:05] Nishith Shah of Aequitas enquired about the kind of new products the company is focusing on in capacity expansion and if the capacity is ready. Puneet Khurana MD said that it’s more of composite cylinders that the company is focusing on. On capacity, EKC is in the process of increasing capacity.
- [00:23:12] Prakash Chandra asked about the reliability of outcomes from the US business. Puneet Khurana MD answered that US is all project based business, and there were some completion of big projects last quarter and so there was a sudden jump in 4Q23.
- [00:25:39] Prakash Chandra enquired about the improvement in profitability that’s expected from the steel prices in the segment or if it’s insulated. Puneet Khurana MD clarified that from a steel prices perspective, it’s more stable now and it’s factored in the profitability.
- [00:26:14] Prakash Chandra asked about the outlook for commercial vehicle inventory in 1Q24. Puneet Khurana MD answered that the inventory is consumed every quarter and there could be better off-take going forward.
- [00:27:07] Harsh asked about EMC’s market share for CNG cylinders and if there’s lot of new capacity coming up in the industry across India. Puneet Khurana MD replied that market share would be around 40%. And the company added that it’s not seeing any new capacity being added currently as it’s going through overcapacity.
- [00:27:56] Harsh asked about margins going forward and the utilization levels currently. Puneet Khurana MD answered that margins should be stable or it will improve surely going forward. And capacity utilization for 4Q23 is around 60%.
- [00:30:20] Harsh enquired if anything is happening on the hydrogen side for cylinder companies. Puneet Khurana MD replied that the company is looking at it but hydrogen will take some time to come as a lot of infrastructure and stakeholders will have to come together.
- [00:33:06] Abhijit Mitra at Ionis Alpha asked about inventory days increasing and if there is risk of inventory write-down. Puneet Khurana MD clarified that there is no risk of inventory write-down currently. The inventory is moving swiftly.
- [00:34:34] Darshil Jhaveri with Crown Capital asked about revenue expected for FY24 and if there’s any competition from the EV side. Puneet Khurana MD replied that it’s going to be better than FY23. And on EVs both are different markets and it will take time for CNGs to be replaced with EVs.