Detailed Narrative
Strong Q1 FY26 Performance Driven by Domestic and International Demand
Everest Kanto Cylinder Limited reported a robust Q1 FY26, with consolidated revenue growing 12.9% YoY to Rs. 386.9 crore. This strong performance was fueled by healthy demand across both domestic and international businesses. Consolidated EBITDA saw a significant increase of 47.8% YoY, reaching Rs. 61.3 crore with a margin of 15.8%. The company's consolidated PAT surged 84.9% YoY to Rs. 51.6 crore, which included an exceptional gain📎 of Rs. 12.6 crore from an Employee Retention Credit (ERC) received by its US subsidiary.
Segmental Highlights: India Operations and US Business Excel
Indian operations delivered strong standalone growth, with revenue at Rs. 237 crores, up 20.9% YoY. Margins for the India business improved significantly to 17.2% in Q1 FY26, compared to 9.4% in Q1 FY25, and standalone PAT grew 122.8% YoY to Rs. 26.1 crore. The US business also performed remarkably well, contributing Rs. 109 crores in revenue, a 21% YoY increase, and EBIT of Rs. 27 crores, up 83% YoY. Management expects the US region to perform exceptionally well for the full year, highlighting the strength and balance of the company's geographical portfolio.
Progress on Capacity Expansion in Mundra and Egypt
The company is actively progressing with its capacity expansion plans, with new facilities in Mundra, India, and Egypt. The Egypt plant is expected to commence trial production between October and November 2025, with commercial production following 2-3 months later, and its impact becoming visible in FY27. The Mundra facility is anticipated to be ready for commercial production by the end of the current fiscal year (Q4 FY26). These expansions will add 120,000 units of capacity in Egypt and 200,000 units in Mundra, enabling a step-up in supply capabilities from FY27 onwards.
Conservative Margin Outlook and Capital Allocation Strategy
Despite achieving a strong 17.2% standalone margin in India during Q1, management provided a conservative outlook, stating that margins between 13% and 14% would be 'most ideal' for the India business. The total planned capex for these new facilities is approximately Rs. 245 crores (Rs. 120 crore for Egypt and Rs. 125 crore for Mundra), with Rs. 160 crores already spent. The company plans to fund this capex through a mix of internal accruals and borrowings, aiming to remain net debt-free or with minimal borrowings, with gross debt at Rs. 140 crores and a cost of debt around 9%.
Strategic Focus on Core Business and Emerging Opportunities
Everest Kanto Cylinder Limited reiterated its commitment to strengthening its core cylinder business and product development within this segment, rather than venturing into broader clean energy infrastructure or smart gas storage solutions at present. However, the company is actively exploring and supplying products for emerging applications in compressed biogas, semiconductors, and green hydrogen, viewing these new sectors as having significant future potential for growth, even if currently small.
Contingent GST Liability and Order Book Visibility
The company is managing a contingent GST liability of Rs. 352 crores, which represents approximately 30% of its net worth. This matter is currently under High Court appeal, and management expressed confidence in a favorable resolution, with updates expected around Diwali. The US business maintains a robust order book of USD 70 million, providing 1.5-2 years of revenue visibility, while the India business has an order book of approximately Rs. 60 crore, characterized by continuous execution and new order inflows.