Everest Kanto, NTPC, Ashiana Housing

Everest Kanto, NTPC, Ashiana Housing

Everest Kanto

Everest Kanto

Everest Kanto

Everest Kanto

Everest Kanto

Everest Kanto

Everest Kanto Cylinders, Ultratech Cement, Grasim Cement Everest Kanto Cylinders, Ultratech Cement, Grasim Cement

Everest Kanto Cylinders, Ultratech Cement, Grasim Cement

Everest Kanto

Everest Kanto

EKC

EKC

EKC

Investors with short-term trading perspective can consider selling the stock of Everest Kanto Cylinder. This stock was one of the underperformers of 2009. It could not move beyond its June 2009 peak of Rs 238 and declined to the low of Rs 108 by the end of this February. The stock is currently trading well below its medium-term support at Rs 144 and a close above this level is needed to review the medium-term view.

The short-term trend in the stock is down since the April 8 peak of Rs 131. The pull-back witnessed over the last three sessions halted at the key short-term resistance at Rs 121. The 50-day simple moving average present at this level will also act as a hurdle in the near-term. Daily rate of change oscillator as well as the moving average convergence divergence oscillator is featuring in the negative zone denoting that the short-term view is negative.

Investors with short-term perspective can sell the stock with stop at Rs 121.5. Targets for the stock are Rs 114 and Rs 110.

via BL

Everest Kanto

We recommend a sell in the stock of Everest Kanto Cylinder from a short-term perspective. The stock's primary trend is down since January 2008 peak of Rs 385, shaping lower peaks and troughs. Moreover, after encountering resistance at around Rs 210 in September 2009, the stock has been on a medium-term downtrend. Last October, the stock conclusively penetrated 200-day moving average and is trading well below its long-term and short-term averages. The stock decisively broke through a significant long-term support level at Rs 135 on January 28, plunging 5 per cent and is currently trading below this level. Both the daily and weekly relative strength indices are in the bearish zone. The daily moving average convergence and divergence has signalled a sell and hovering in the negative territory. The weekly MACD also is hovering in the negative territory. Our short-term forecast is bearish for the stock. We expect its decline to prolong until it hits our price target of Rs 115. Traders with short-term perspective can consider selling the stock while maintaining stop-loss at Rs 134.

via BL

Everest Kanto

Everest Kanto

EKC

EKC

Everest Kanto Cylinders

Long-term investments can be retained in the stock of Everest Kanto Cylinders (EKC), which makes high-pressure CNG (compressed natural gas) and industrial cylinders. Though the stock is up 77 per cent from our earlier ‘Buy’ recommendation in March at Rs 102, shareholders can remain invested in the stock, given the uptick in the company’s order enquiries in the quarter just ended.

Though EKC’s recent quarterly numbers were far from impressive, the addition of Maruti Suzuki to its OEM client list and the possibility of improving margins in the coming quarters helped by lower material cost promises upside potential in future. At the current market price of Rs 181, the stock trades at about 13 times its likely FY10 per share earnings.

This appears reasonable, given that EKC holds the lion’s share of the cylinder market in India (80 per cent share) and operates on capacities far superior to its peers.
Growth story intact

While in the last two quarters, the company’s growth was capped due to the slowdown in auto sales, the management has indicated at improving demand undercurrents in the coming quarters. Led by the overall improvement in the macro-economic scenario, EKC has seen an upturn in order enquiries and demand for its cylinders from both the retrofit and OEM segments in the last quarter.

That EKC added Maruti Suzuki as its OEM client last quarter may also help drive growth, given the carmaker’s wide popularity and distribution reach in the country. Besides, it merits attention that Maruti Suzuki has recently launched the CNG version of its highest selling small car, Alto.

While this new CNG variant of the car would initially be available only in Delhi and the National Capital Region (NCR), the company after gauging the response to the Alto CNG plans to launch CNG versions of all its models by the first quarter of next year.

EKC may see a ripple effect from Maruti’s demand for CNG variants, as it may prompt other OEMs (such as Bajaj Auto, Tata Motors, Ashok Leyland, Swaraj Mazda and Hindustan Motors, which are EKC’s clients) to press ahead with similar models. The lack of proper CNG distribution infrastructure in the country, however, can impede growth.

The company’s high-margin jumbo cylinders too are likely to enjoy better demand. Driven by export orders (to begin supply from end of the current quarter), the jumbo cylinder segment is likely to better its performance by the second half of the current fiscal.

And if the management’s indication of a possibility of export orders becoming repeat orders fructifies, it would lend further strength to its growth prospects. These cylinders, used specifically in the transportation of large quantities of gases, may also come in much demand with the availability of surplus gas supply for transportation from the KG Basin; EKC though is yet to strike a formal deal.

Over the long-term, the setting up of city gas distribution (CGD) networks in many cities may also help the demand for CNG cylinders. The Petroleum & Natural Gas Regulatory Board expects the city gas distribution network to spread to 100 cities by the end of the Eleventh Five-Year Plan (2012). Besides, industry estimates expect the CGD sector in India’s consumption of gas to quadruple, from the 5-6 per cent of the total available gas, in a few years.
Results disappoint

Led by lower sales, high raw material cost and depreciation, EKC’s earnings numbers for the June quarter were below expectations.

The company reported 19 per cent fall in overall sales, while profits declined by 52 per cent. For the quarter, while its India and Dubai sales fell by 28 per cent and 47 per cent respectively; it China sales grew by seven times (albeit on a low base) and that of US improved by 55 per cent.

While bulk of the fall in revenue was driven by drop in volumes, the quarter also witnessed a decline in blended realisations per cylinder (due to higher mix of low-priced industrial cylinder sales). This, in addition to the high cost of inventory, led to a margin slippage of over 12 percentage points to 21.7 per cent.

Sale of low-value cylinders by its US subsidiary, CP Industries also led to the margin contraction. The coming quarters however may witness an improvement in margins as the company reaps the benefit of low raw material cost on the new purchases made at current price levels.
Triggers to watch

While political uncertainties in Iran and delay in dispatch of consignment led to the poor performance of the company’s Dubai unit, improvement in the political climate will help better sales. But in the event of continued uncertainty on the political front, EKC may be forced to look for newer markets.

Besides, developments in the form of EKC’s entry into city gas distribution in Kolkata by way of a joint venture with a local company which holds gas distribution rights, though presents a perfect synergy to its existing line of business, may need to be monitored.

via BL

Everest Kanto

Everest Kanto

Punj LLoyd, Everest Kanto

Punj LLoyd, Everest Kanto

Everest Kanto

Everest Kanto

Everest Kanto

Everest Kanto

HCL Technologies,Wipro,ACC,Zee,Suzlon,Everest Kanto

HCL Technologies,Wipro,ACC,Zee,Suzlon,Everest Kanto

Everest Kanto

Investors with a long-term perspective can consider accumulating the stock of Everest Kanto Cylinder (EKC), on declines linked to the broad markets. Attractive valuations apart, revenue potential from the commencement of the KG Basin gas supply and the company’s planned entry into city gas distribution in Kolkata underscore our recommendation.

While the stock price had corrected significantly in the last couple of months on concerns that falling crude oil prices and slackening demand in the auto sector could curb demand for its CNG cylinders, such concerns appear factored into the stock’s rock-bottom valuations. At the current market price of Rs 103, the stock trades at about 6 times its estimated FY10 per share earnings, using very conservative growth estimates. However, there is no denying that EKC will face the heat from the economic downturn — the company already has had order cancellations due to the slowdown in commercial vehicle sales. But the demand for CNG cylinders over the long term would still receive support from its being a cost-effective option; countries are likely to continue to invest in ensuring their energy security over the next few years.

Despite the slowdown in commercial vehicle sales, the company has received orders from Tata Motors and Ashok Leyland for buses in Delhi, corroborating the potential of CNG as fuel. In the near term, the availability of surplus gas supply for transportation from the KG Basin holds the key to the company’s prospects. While EKC is yet to strike a formal deal, that it has over 80 per cent share of the domestic market puts it in a strong position to tap this business opportunity. This will also help the company improve its product mix, as gas transportation will entail the use of industrial as well as high-margin jumbo cylinders. EKC had earlier announced its planned entry into city gas distribution in Kolkata by way of a joint venture with a local company with gas distribution rights, and this also presents a diversification opportunity.

For the quarter-ended December 2008, while EKC’s sales continued to expand strongly (99 per cent growth year-on-year), much of this was driven by the company’s UAE and US operations. Net profits grew 30 per cent, on the back of operating profit margins of about 28 per cent. Driven by the decline in demand from India and China, the company has deferred the second phase of its expansion for its Chinese operations. While changing product mix may help it sustain margins at current levels, earnings may continue to lag topline growth, due to the higher depreciation and interest burden. Earnings registered a growth of 30 per cent year-on-year; it, however, fell 11 per cent sequentially.

EKC

EKC

Everest Kanto

Investments with a two-three-year perspective can be considered in the stock of Everest Kanto Cylinders, a leading manufacturer of high-pressure CNG (compressed natural gas) and industrial cylinders. Our optimism stems from the relatively strong demand for EKC’s products when compared to that of other mid-tier capital goods and manufacturing companies, besides the abating pressure on input costs, and the company’s highly diversified geographical presence.

At current market price of Rs 184, the stock trades at about nine times its likely FY10 per share earnings. While this may appear at a premium to that of the market, it is supported by the company’s fairly steady growth prospects. That said, investors may be better off accumulating this stock in small lots, given the heightened volatility in the broad markets.
Earnings scorecard

In the last two years, the company has grown its consolidated revenues at a compounded rate of over 50 per cent, while profits soared by over 78 per cent.

Even in recent times, despite the all the mayhem caused by the unprecedented rise in input price and the slowdown in global economies, the company has done well to maintain its growth rates.

In the quarter ended September-08, EKC put up a 73 per cent growth in sales, driven mainly by its recent acquisition of US-based CP Industries (17 per cent of revenues) and the commencement of production in its China plant.

Profit growth, however, remained a little curtailed at 52 per cent, attributable to the increased interest cost (as the acquisition of CP Industries was funded primarily through debt) and high depreciation.

It is, however, the company’s performance on the margin front that inspires more confidence. Despite the spurt in raw material prices, EKC managed to up its EBITDA margins by over 1.1 percentage points to 31.8 per cent.

This was made possible due to the company’s sufficiently large build-up in inventory that insulated its margins. Besides, the present softening trends in input prices may only help it maintain its margins from here on.
Demand dynamics

While a high crude oil price would have substantially catalysed the demand for CNG-based energy options considering that they would then have been more cheap and viable in comparison, their demand may well continue to remain robust despite the substantial fall in oil price. This is because regardless of the oil price, most countries in the long run are likely to be on the constant look-out for ensuring their energy security. So, while blips in oil price may impact the near-term demand dynamics for CNG-based applications, their long-term picture continues to look promising.

On that note, considering that EKC’s expanded capacities (capacity to manufacture over one million cylinders per year), which compares with some of the global names in cylinder makers such as Beijing Tianhai Industry Company (China) and Faber Cylinders (Italy), puts its future growth prospects in better light. That EKC only recently (in July-08) hiked the price of its cylinders also underscores the strong demand for its products.

Another key point that strengthens the investment argument in EKC’s favour is its strong foothold in the domestic market. With an 80 per cent market share in India, EKC appears best placed to benefit from the Supreme Court injunction mandating the use of CNG as auto fuel for heavy vehicles in New Delhi and the city gas distribution initiatives of the government.

While these factors, plus the fact that some of the leading car makers in the country have announced CNG variants of cars, may go a long way in paving the company’s future growth story, it needs to be understood that the CNG, as a concept, is still in its nascent stage in India.

So, while that leaves a lot of room for future growth, it also leaves quite a few issues for the government to put in place, including improving CNG infrastructure, before CNG applications take off in a big way in India.
Concerns

And it is this dependence on government spending and policy initiatives that can limit or postpone the company’s domestic growth avenues. On the export front, while demand continues to remain stable, the company’s earnings may be susceptible to the highly dynamic forex market.

That in the last quarter, the company suffered a Rs 12-crore translation loss on its FCCB may help put this earnings risk in perspective. These apart, delays in the production ramp-up of new plants also pose a downside risk.