This CNG cylinder producing stock surged more than 10 per cent despite market weakness

Bajaj Auto Limited, Tata Motors Limited, Ashok Leyland, Torrent Gas, HPCL, IOCL, Safepro, Ecofuel are among the clients of the company.

On December 23, Everest Kanto Cylinder Ltd was the top gainer among S&P BSE group ‘A’ companies. The shares of Everest Kanto Cylinder Ltd closed at Rs 103.5, surging 10.81 per cent from its previous close of Rs 93.4. The stock opened at Rs 93 and made an intraday high and low of Rs 108.6 and Rs 93, respectively.  

Everest Kanto Cylinder Ltd is involved in the business of manufacturing high-pressure gas cylinders and other equipment used to compress and storage natural gas, liquids, and air. Everest Kanto’s cylinders are also used in fire extinguisher, healthcare, defence, food and beverage sectors.  

The company caters to major OEMs and City Gas Distributors. Bajaj Auto Limited, Tata Motors Limited, Ashok Leyland, Torrent Gas, HPCL, IOCL, Safepro, Ecofuel are among the company’s clients.  

As per FY22, the company has ROE and ROCE of 33.9 per cent and 40.9 per cent, respectively. About 60 per cent of the company’s revenue comes from CNG, while 40 per cent comes from industrial and specialty gases like Nitrogen, Helium, Argon, etc. The company has two manufacturing plants which are operating at 90 per cent utilization as of FY22 period ending.  

Triggers for the stock 

• Fast growing city gas distribution infrastructure is forcing the demand for high pressure cylinders for storage and transportation of natural gas across country. 
• Great cost difference between usage of natural gas and liquid fuels in automobile is leading to increasing adoption of CNG in automobile, triggering the demand for the high-pressure cylinders. 
• Focus on value added products. 
• Consistent improvement in the working capital days. 
• The company has current capacity of 1.1 million cylinders which is expected to grow to 2 million by FY2025. 

The company has a market capitalisation of Rs 1160 crore, and its shares are trading at a PE multiple of 6.3x.