Everest Kanto Cylinder zooms 44% in 2 days; stock hits over 10-year high

Given the acute shortage of oxygen cylinders amid rising Covid-19 cases in India, the company is expected to see volume growth in its medical equipment segment

Shares of Everest Kanto Cylinder hit an over 10-year high of Rs 110.70, soaring 20 per cent on the BSE in the intra-day trade on Tuesday. The stock of one of India's leading manufacturer of seamless steel gas cylinders was trading higher for the fifth straight day, having rallied 44 per cent alone in the past two trading days, on expectation of strong earnings growth. It was quoting at its highest level since July 2010.

In the past six months, the stock has zoomed nearly 300 per cent. In comparison, the S&P BSE Sensex was up 18 per cent during the same period. The counter has seen huge trading activities with the average volume jumping over six-fold today. A combined 11.25 million equity shares, representing 10 per cent of total equity of the company, have changed hands on the NSE and BSE till 01:15 pm.

Given the aggressive trading in the stock, the BSE sought clarification from Everest Kanto Cylinder earlier today with reference to movement in volume. The reply is awaited.

Everest Kanto Cylinder is India’s largest player in high pressure gas cylinders with market share of around 50 per cent. The company has around 150-strong client base from diverse verticals including automobile OEMs/after-market, city gas distribution, industrials, cylinder cascades, medical sector, firefighting equipment and defence – including Tata Motors, Bajaj Auto, Hyundai, Toyota, BOC India, Praxair, Mahanagar Gas, Adani Gas.

Given the acute shortage of oxygen cylinders amid rising Covid-19 cases in India, the company is expected to see surge in demand in its medical equipment segment. The demand for medical oxygen has gone through the roof and there are reports of medical oxygen shortages from several states and Union Territories, including Maharashtra and Delhi.

For October-December quarter (Q3FY21), Everest Kanto Cylinder reported a 71.2 per cent year on year (YoY) jump in its consolidated earnings before interest, taxes, depreciation, and amortization (ebitda) at Rs 47.9 crore. The consolidated ebitda margin expanded 480 basis points (bps) from 14.6 per cent to 19.4 per cent. Further, the company’s revenue during quarter grew 29.2 per cent YoY at Rs 247 crore.

The management said the margin expansion was driven by continued demand, firm pricing and topline growth on a stable operating base. The growth momentum continued in Indian operations driven by wide-ranging demand from gas infrastructure companies, auto OEM’s, healthcare and industrial sectors. The demand growth expected to sustain, enabling ongoing prospects for the business.

"We plan to expand capacities by 200,000 cylinders in a phase-wise manner that will allow it to meet the growing demand for products and maintain prominent market position.  A greenfield facility will be set-up at a suitable location in Gujarat for this purpose over three phases with an investment of around Rs 45 crore, of which the first phase will be completed in FY24," the company had said.