Everest Kanto Cylinder Limited — Q1 FY26

Everest Kanto Cylinder Ltd Q1 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=zmZ7dtgJ0S4 Published: 8 months ago

0:00 Ladies and gentlemen, good day and welcome to the earnings conference call of Everest Scanto Cylinder Limited. As a 0:08 8 seconds reminder, all participant lines will be in the listenon mode and there will be an opportunity for you to ask questions after the presentation concludes. Should 0:16 16 seconds you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded. 0:27 27 seconds I now hand the conference over to Mr. 0:29 29 seconds Mitesh Jane from CDR India. Thank you and over to you sir. 0:35 35 seconds Good evening everyone and thank you for joining us on several cylinders Q1 FI26 earnings conference call. We have with 0:42 42 seconds us today Mr. Punit Kurana managing director and Mr. Sanjiv Kapoor chief financial officer of the company. We 0:50 50 seconds 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 0:58 58 seconds 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 1:05 1 minute, 5 seconds included in the results presentation shared with you all earlier. I would now request Mr. Punit Kurana to make his opening remarks. 1:16 1 minute, 16 seconds Yeah. Uh good evening everyone and thank you for joining our earnings conference call. I will begin by starting an overview of her performance for the 1:24 1 minute, 24 seconds quarter followed by a Q&A session. We're pleased to share FYI 277 has begun on 1:31 1 minute, 31 seconds strong note for EKC. In Q1, consolidated revenue stood at 386.9 crores, up 12.9% year-onear. 1:41 1 minute, 41 seconds This was driven by healthy demand across both our domestic and international businesses. Consolidated IBIDA came in 1:48 1 minute, 48 seconds at 61.3 crores up 47.8% year-onear with margin at 15.8% 1:57 1 minute, 57 seconds while PAT for the quarter stood at rupees 51.6 crores up 84.9% yearonear 2:05 2 minutes, 5 seconds this includes an exceptional gain of 12.6 6 crores representing an employee retention credit received by CPI industries our US subsidiary. 2:16 2 minutes, 16 seconds Our standalone basis revenue were rupees 237 crores up 20.9% over the same period 2:24 2 minutes, 24 seconds last year with margins improving to 17.2% from 9.4% 4% in Q120 FI25 2:35 2 minutes, 35 seconds and PAT at 26.1 crores up 122% 22.8% 8% yearonear. 2:42 2 minutes, 42 seconds Our Indian operation delivered strong growth with revenue at 237 crores up 21 2:50 2 minutes, 50 seconds 1% year on year and IBIT at rupees 34 crores up 143% yearon year. The US 2:58 2 minutes, 58 seconds business also performed remarkably well with revenues of rupees 109 crores up 21% 3:05 3 minutes, 5 seconds yearonear and a bit at rupees 27 crores up 83% yearon year given that the US market in order driven performance may 3:14 3 minutes, 14 seconds vary from quarter to quarter how we expect the region to perform exceptionally well for this year together these results highlight the 3:22 3 minutes, 22 seconds strength and the balance to our geographical portfolio on On the policy and sectoral front, the 3:29 3 minutes, 29 seconds government continues emphasis on CNG adoption, clean energy and high-tech manufacturing in creating a favorable environment for man high pressure gas 3:37 3 minutes, 37 seconds soil solutions. Emerging applications in areas such as compressed biogas, semiconductor and green hydrogen are gaining momentum and our highpressure 3:46 3 minutes, 46 seconds gas cylinders are already enabling safe and reliable storage in these segments. 3:52 3 minutes, 52 seconds Our capacity expansion front, our both facilities in Mundra in India and in Egypt are progressing as per plan. The 4:00 4 minutes state-of-the-art plans will be instrumental in enhancing our capability to cater to growing in needs of domestic 4:08 4 minutes, 8 seconds and global customers. We expect both facilities to come on stream during the current financial enabling us to step up 4:16 4 minutes, 16 seconds in supply capability from year 27 onwards. 4:21 4 minutes, 21 seconds In closing, the first quarter has been strong start of the year with healthy demand, visibility, upcoming capacity 4:28 4 minutes, 28 seconds addition, a widening set of applications of our products and a strong balance sheet position. We are well positioned 4:36 4 minutes, 36 seconds to capture the next phase of growth and continue delivering value to our stakeholders. With that, I conclude my opening remark and I request the 4:44 4 minutes, 44 seconds moderator to open the floor for questions. 4:47 4 minutes, 47 seconds Thank you very much. We will now begin with the question and answer session. 4:52 4 minutes, 52 seconds Anyone who wishes to ask a question may press star and then one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and two. 5:04 5 minutes, 4 seconds Participants are requested to use handsets while asking a question. 5:09 5 minutes, 9 seconds Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then one. 5:28 5 minutes, 28 seconds Our first question comes from the line of 5:35 5 minutes, 35 seconds Sukrit Dart from Eyesight Fin Private Limited. Please go ahead. 5:41 5 minutes, 41 seconds Good evening to the uh Everest Central team. I have two questions. One is for Mr. Kurana and one is for Mr. Kapoor. So 5:48 5 minutes, 48 seconds my first question to Mr. Kurana is with the demand rising in CNG and hydrocarbon cylinders and global expansion underway. 5:58 5 minutes, 58 seconds How are you planning the next big step for Kanto? Are you building a road map to move beyond just cylinder supply 6:06 6 minutes, 6 seconds towards smart gas storage uh AIEL safety features or partnerships that can help 6:12 6 minutes, 12 seconds uh average Santo play a bigger role in the clean energy infrastructure ecosystem? Yes, thank you. 6:22 6 minutes, 22 seconds Uh yeah, you know just to uh give perspective definitely you know on CNG and hydrogen we are building new 6:29 6 minutes, 29 seconds products we continue to you know invest in uh product development and other activities on AI you know this is 6:37 6 minutes, 37 seconds primarily new subject for us. So we are definitely exploring AI in as the aspect of improving our processes and u you 6:47 6 minutes, 47 seconds know more efficiency at um at plant level. Uh and what is the other question you sorry I missed uh anything else uh 6:56 6 minutes, 56 seconds that uh yes no so my other question was uh is there a road map which you are planning 7:03 7 minutes, 3 seconds uh just beyond your Yeah. So sure you know uh so you know we continue to be you know strong in the in the 7:10 7 minutes, 10 seconds cylinder business and you know product development in cylinder and you know uh in our business you know we are catering 7:18 7 minutes, 18 seconds across wide spectrum of industry. So it's uh it's sometime challenging to uh 7:25 7 minutes, 25 seconds go beyond u you know uh just uh the focus on the cylinder business. So you know the cylinder business itself has a 7:34 7 minutes, 34 seconds a lot of um you know bandwidth it takes of ours. So to to go beyond that is sometime we find it challenging. So we 7:41 7 minutes, 41 seconds we continue to have a road map focusing on new products in the cylinder business only at the present. We we're not going 7:47 7 minutes, 47 seconds anything uh outside the the the the product line of the company and the core core business of the company at the moment. 7:56 7 minutes, 56 seconds Understood. Thank you. My second question to Mr. Kapoor is as you invest across plants uh uh you know new new 8:03 8 minutes, 3 seconds plants and new new tech and new formats like hydrogen and composites I would like to understand how do you decide 8:10 8 minutes, 10 seconds where to spend first uh is there any system of capital allocation that that you follow uh which which ensures 8:19 8 minutes, 19 seconds short-term grow returns with long-term uh leadership in green clean energy I would I would like to understand your uh point of view on that Mr. Mr. Kapoor. 8:29 8 minutes, 29 seconds So Mr. Patel obviously we always look for uh value. So if we are investing 8:36 8 minutes, 36 seconds something we will always look at the returns and the payback and based on that I mean our decisions are taken. 8:46 8 minutes, 46 seconds Okay. Okay. That's uh that's fair enough. So thank you for the guidance and I wish you the best of luck for the next Q2. Thank you. Thank you. 8:56 8 minutes, 56 seconds Thank you. 8:57 8 minutes, 57 seconds Before we take the next question, a reminder to everyone. You may press star and then one to ask a question. Our next 9:05 9 minutes, 5 seconds question comes from the line of Re Jane from Force Auto. Please go ahead. 9:10 9 minutes, 10 seconds Yeah, congratulation on the good set of numbers. Uh my first question is regarding the contingent liability. So I 9:19 9 minutes, 19 seconds saw in the annual report that the GST liability stands at 352 crores which is 9:25 9 minutes, 25 seconds roughly 30% of our net worth. So just wanted an update on this and how confident we are that we will win this GS2 dispute. 9:38 9 minutes, 38 seconds Uh so I'll answer this uh as I've already indicated earlier in my earlier uh discussions also that we have gone 9:46 9 minutes, 46 seconds for an high court appeal uh for which the hearing has not yet come and we also made representation to the government. 9:54 9 minutes, 54 seconds So uh I believe that uh very recently government has announced that they'll be having classification matters which will 10:01 10 minutes, 1 second get resolved. So ours is also a classification matter which we believe we have put it strongly and we should get a favorable reply. 10:12 10 minutes, 12 seconds Okay. Uh so when is the next hearing date? 10:16 10 minutes, 16 seconds Yes, hearing date is not yet available but uh the GST council meetings and 10:24 10 minutes, 24 seconds other things are already you know announced and uh you know by Diwali there may be lot many changes which may come about and in that even the issue on classification is going to be addressed. 10:37 10 minutes, 37 seconds Okay. So any so recently there was GST uh rate change in lot of products. So are we still at 28% or 18%. 10:47 10 minutes, 47 seconds We are at 18%. 10:49 10 minutes, 49 seconds Okay, got it. And regarding USA, uh what is the current order book? 10:57 10 minutes, 57 seconds So order book is around 70 million USD. 70 million USD. Yes. 11:04 11 minutes, 4 seconds And are we expecting any more developments in the order book for USA? 11:11 11 minutes, 11 seconds So I mean uh we've got a more than a year it's a one and a half or to two years of you know product which is 11:19 11 minutes, 19 seconds already planned. So yes I mean it keeps coming it's like we execute and we keep getting new orders. 11:26 11 minutes, 26 seconds Mhm. Got it. 11:29 11 minutes, 29 seconds And regarding the new preps which is Mundra and Egypt uh what is the commissioning timeline? 11:39 11 minutes, 39 seconds So uh for Egypt uh we are having uh October to November as the uh you know uh start of uh trial production and and 11:48 11 minutes, 48 seconds maybe in the next uh after that in the next 2 3 months we'll have commercial production. So the impact would obviously be visible more in FI27. 11:58 11 minutes, 58 seconds Okay. And same for Mundra. Mundra also is uh uh you know being ready for uh the last 12:05 12 minutes, 5 seconds quarter and we expect that we can have commercial production just uh before the quarter closes or rather the year closes. 12:15 12 minutes, 15 seconds Got it. And could you comment on the demand scenario in Egypt? How is the demand there? 12:24 12 minutes, 24 seconds So there is strong demand there because the government is pushing for uh people converting their vehicles into CNG based 12:33 12 minutes, 33 seconds vehicles and uh uh we believe that uh that be a good project for us to 12:40 12 minutes, 40 seconds have so ramp up would not be an issue in Egypt will it correct? 12:48 12 minutes, 48 seconds Yeah. So obviously uh we'll first you know start the production and cater to the requirements and then go for phase two. 12:56 12 minutes, 56 seconds No no I'm talking about the existing land which we are putting up the capacity utilization will not be an issue in the first phase. 13:03 13 minutes, 3 seconds No it won't be an issue. 13:06 13 minutes, 6 seconds Okay. Got it. And I saw your press release that we are seeing new opportunities in uh bio gas semiconductors. 13:15 13 minutes, 15 seconds So can you comment on how big the opportunity is? Uh prof. 13:22 13 minutes, 22 seconds Yeah. Yeah. Yeah. Sure. Sure. So, so you know biogas of course uh you know as you know in India lot of activity is going on by government incentives to you know 13:31 13 minutes, 31 seconds set up more and more bio gas plants for uh waste management. So this is a this is a you know a sector that is quite uh 13:40 13 minutes, 40 seconds growing quite aggressively from the last two three years. So we continue to see good growth in that. And semiconductor is a completely new segment. You know we 13:48 13 minutes, 48 seconds have introduced some product in the semiconductor industry. So we're hoping to you know this also sector to grow quite well in the coming future. 13:57 13 minutes, 57 seconds So are we already in talks with a few customers for the semiconductor? 14:02 14 minutes, 2 seconds Yeah. No we already supplying so we are supplying products in the sector. We already supplying products. Only thing is you know these are new sectors. So 14:08 14 minutes, 8 seconds you know uh like everything new begins you know small but you know we see a a great potential future uh you know in 14:16 14 minutes, 16 seconds this also. So the you know the the the thing is that uh you know there was a lot of discussion going on for years but nothing was happening now we can see 14:24 14 minutes, 24 seconds things are you know bio gas plants are coming semiconductor industry investments are coming in a large way. 14:30 14 minutes, 30 seconds So definitely you know uh we feel that that this kind of thing is is going to give us a advantage going forward. 14:38 14 minutes, 38 seconds Okay, got it. And my last question is regarding are there any import from China in India for the cylinder? 14:47 14 minutes, 47 seconds Yes, there there are imports but they're not so significant uh you know not not such large imports are not there. 14:57 14 minutes, 57 seconds Okay, I'm asking this because uh our revenue in India for the whole year is 15:04 15 minutes, 4 seconds uh close to uh thousand crews. So just wanted to understand the industry side. 15:11 15 minutes, 11 seconds Is it a very small industry or I'm missing something? 15:19 15 minutes, 19 seconds I don't know. Sanjiv, how do you reply to this? Is it small? No, I mean the industry size we have not been able to really map that because I mean uh very 15:28 15 minutes, 28 seconds few data is available of our competitors. 15:32 15 minutes, 32 seconds So I mean yes it's an industry which is growing for sure and the impost like said are not much to impact. 15:43 15 minutes, 43 seconds Okay got it sir and all the best for the future. Thank you. Thank you. Thank you. 15:50 15 minutes, 50 seconds Thank you participants. You may press star and then one to ask a question now. 16:09 16 minutes, 9 seconds Ladies and gentlemen, to register for a question, please press star and then one. 16:19 16 minutes, 19 seconds Our next question comes from the line of Anil Jane from Equip Passion Capital. Please go ahead. 16:26 16 minutes, 26 seconds Yeah, congratulations for a good set of numbers. Yeah, I just wanted to know uh what is your take on India business? It 16:35 16 minutes, 35 seconds has grown by 20% in the quarter and margins have at 17%. So how do you see the next quarter and the uh FI26 panning out in terms of India business? 16:51 16 minutes, 51 seconds Hello. Yeah. Yeah. Yeah. Yeah. Yeah. Sanjiv, you want to take that or? 16:56 16 minutes, 56 seconds Yeah. I I'll take this. So, uh uh we believe that the the obviously with lot many you know changes like the recent 17:03 17 minutes, 3 seconds announcements and uh we see a lot of positivity. 17:08 17 minutes, 8 seconds So going forward we expect that you know we'll do a good business here. 17:16 17 minutes, 16 seconds Do we think that uh this kind of growth and margin are sustainable for the rest of the year? 17:22 17 minutes, 22 seconds No, we'll continue to uh you know want to achieve such margins but obviously we want to be conservative 17:30 17 minutes, 30 seconds too. So uh we will always go for a conservative margin. 17:35 17 minutes, 35 seconds Okay. But what do you see the sustainable margins like why is there any one-off in the quarter or No, it's not oneoff. I mean it's like we 17:43 17 minutes, 43 seconds we do we do make efforts to ensure that we are having good margins available. So obviously there goes into strategy and 17:51 17 minutes, 51 seconds planning also. So still I would rather say that margins between you know 13 14 would be most ideals. 17:59 17 minutes, 59 seconds Okay. And what about growth? 18:02 18 minutes, 2 seconds Growth 10 to 15% is what we we are sure that it will happen. 18:07 18 minutes, 7 seconds Okay. looking at the order book you are uh expecting 10 to 15% growth right 14 18:17 18 minutes, 17 seconds 15% growth okay and uh what about your US business it has shown like margins of 18:26 18 minutes, 26 seconds quite good margins so do you see that sustaining uh based on our discussions with them 18:33 18 minutes, 33 seconds yes they do say that uh they will continue to have good margins and uh the uh the quarter which has come 18:42 18 minutes, 42 seconds except for the exceptional item we believe that they would continue to have good margins. 18:49 18 minutes, 49 seconds Okay. And uh what about UA business has not done well in the quarter. So where do you see the next few quarters? 18:58 18 minutes, 58 seconds UA will still be moderate. Okay. 19:01 19 minutes, 1 second So we we are not uh you know saying much about uh UAE. So we will you know it's they are facing certain headwinds 19:10 19 minutes, 10 seconds okay around them and uh yes they are also working hard to achieve their goals 19:17 19 minutes, 17 seconds okay what will be your total capex on Mundra and Egypt uh this thing 19:25 19 minutes, 25 seconds and what will be the capacity addition capacity addition is uh around 120,000 in uh Egypt Okay. 19:36 19 minutes, 36 seconds And uh in Mundra it's around 200,000. Okay. And what will be capex? 19:44 19 minutes, 44 seconds In first phase of Mundra is around uh 120 crores. Okay. 19:50 19 minutes, 50 seconds And in uh India it's also around 125 crores. A both places are 125 crores. Okay. 19:59 19 minutes, 59 seconds Around. So out of this how much has been spent already? 20:05 20 minutes, 5 seconds till I would say around uh 70 crores and in India is around uh uh 90 crores. 20:14 20 minutes, 14 seconds Okay. Egypt is 70 cr and Mundra is 90. Yeah. Okay. 20:22 20 minutes, 22 seconds And uh what kind of revenue potential do we have from Egypt and margin potential there? 20:30 20 minutes, 30 seconds I mean uh right now we are still setting up the plant. We believe that once it works and we are able to you know control our cost. 20:39 20 minutes, 39 seconds I'm talking about potential not the actual numbers. What? Because you must have you must be setting a plant looking at some numbers. 20:50 20 minutes, 50 seconds So we believe get at least a reasonable margin of around similar to ours. 20:57 20 minutes, 57 seconds Okay. Okay. And what kind of top line? 21:01 21 minutes, 1 second Top line uh still you know we determining that could come to you separately on that. 21:08 21 minutes, 8 seconds Okay. 21:11 21 minutes, 11 seconds Okay. And what is your current order book like in India business? How do you see this second quarter? The current 21:20 21 minutes, 20 seconds second quarter and now see it's like it's continuous. I mean we getting orders we keep executing them. 21:27 21 minutes, 27 seconds So we always have around 60 crores of order book available to us. Okay. Okay. Thank you. Thank you. 21:36 21 minutes, 36 seconds Thank you. Thank you. 21:40 21 minutes, 40 seconds Participants you may press star and then one to ask a question. 21:50 21 minutes, 50 seconds Our next question comes from the line of Deepen Chankara Narayan from Trustline Holdings Private Limited. Please go ahead. 21:59 21 minutes, 59 seconds Good evening everyone and thanks a lot for the opportunity. I joined the call uh late uh so please excuse me if uh 22:07 22 minutes, 7 seconds this question is getting repeated. So in the presentation we have mentioned that uh company has uh uh this product mix 22:15 22 minutes, 15 seconds was the key driver for margins improvement in India business. So can you throw more light on this? 22:24 22 minutes, 24 seconds Yeah Mr. Depends. So obviously uh the product mix always will determine uh so at times we have to let go certain 22:32 22 minutes, 32 seconds orders where the margins are lower. So we we are trying to achieve this and u 22:39 22 minutes, 39 seconds yeah we are focusing more on high of uh high margin products. 22:46 22 minutes, 46 seconds So how was the mix between CNG and uh industrial kind of mix? 22:52 22 minutes, 52 seconds The CJ normally is in the range of 55 to 60%. So that mix being normal only uh for us. 23:01 23 minutes, 1 second Yeah. So it'll it'll vary. I mean I'm not having the exact but obviously it's in this range. 23:08 23 minutes, 8 seconds Okay. Okay. So how do we how do we expect these uh India margins uh uh 23:15 23 minutes, 15 seconds sustaining at these levels or going back to uh our old margin levels of 13 14% itself. 23:22 23 minutes, 22 seconds So I've already answered this by saying that we will like to say this on a conservative basis. That's why I'm 14%. 23:31 23 minutes, 31 seconds But we are we strive to get higher margins. 23:35 23 minutes, 35 seconds Okay. Okay. Because because the uh margins has increased sharply to 17%. 23:41 23 minutes, 41 seconds Right? So that's what is driving that is not understandable clearly. So if this the same case it will get reflected in 23:50 23 minutes, 50 seconds future. So what will drive uh that margins uh to 17% or if it going lesser then what is that driving that's the 23:59 23 minutes, 59 seconds understanding we request no we'll take it as it comes I mean uh 24:06 24 minutes, 6 seconds I'm sure uh we'll wait for the next quarter to happen okay thanks a lot all the best thank Thank you. 24:20 24 minutes, 20 seconds A reminder to everyone, if you wish to register for a question, please press star and then one. 24:34 24 minutes, 34 seconds Our next follow-up question comes from the line of Anil Jane from Equip Passion Capital. Please go ahead. 24:40 24 minutes, 40 seconds Yeah. What is your uh total net debt as of 31st June? 24:45 24 minutes, 45 seconds Net debt is close to zero only because I've got various gross gross debt gross 140. 24:56 24 minutes, 56 seconds Okay. And uh on a consultation yeah I'm talking and uh after the this 25:03 25 minutes, 3 seconds thing capex will be will we be net debt free only or will be there some debt? 25:12 25 minutes, 12 seconds Yeah, we are solving this capex through internal cruise as well as the borrowings. So yes, we may continue to be uh net debt free. 25:22 25 minutes, 22 seconds Net debt free only. Okay. 25:24 25 minutes, 24 seconds Yeah, there will be some borrowings but obviously there'll be earnings also. So it'll match. 25:29 25 minutes, 29 seconds Okay. So we are taking term loan for that. Yes. What is the interest rate on that? 25:37 25 minutes, 37 seconds Interest rate is around 9%. Okay. Okay, thank you. 25:47 25 minutes, 47 seconds Thank you. 25:49 25 minutes, 49 seconds Participants, you may press star and then one to ask a question. 26:01 26 minutes, 1 second As there are no further questions from the participants, I now hand the conference over to the management for closing comments. 26:11 26 minutes, 11 seconds Police sir, can you just read 26:29 26 minutes, 29 seconds it, sir? Okay, I'll read the uh closing comments. 26:37 26 minutes, 37 seconds Uh thank you once again for your interest and support. Should you need any further clarifications or would you like to know more about the company, please feel free to contact our investor relations team or CDR India. Thank you. 26:50 26 minutes, 50 seconds Thank you on behalf of Everisk Canto Cylinder Limited. That concludes the conference call. Thank you for joining us and you may not connect your lines. 26:59 26 minutes, 59 seconds Thank you.