Detailed Narrative
Q2 FY26 Performance Overview
Everest Kanto Cylinder Limited reported a steady performance in Q2 FY26. Consolidated revenue reached ₹360.4 crores, with an EBITDA of ₹42.9 crores, resulting in an EBITDA margin of 11.9%. The company posted a PAT of ₹13.7 crores for the quarter. On a standalone basis, revenue was ₹232.4 crores, and the margin improved to 11.2% compared to 9.3% in the same period last year.
Domestic and International Operations Update
The domestic CNG segment experienced short-term softness due to GST transition in the automotive industry, which has since normalized. The Industrial segment performed as expected. In international operations, the US business saw lower dispatches but healthy first-half performance, though margins were impacted by higher operating costs. The Middle East operations showed early signs of improvement, with the UAE order book slowly improving and expectations for better margins once the order book strengthens.
Capacity Expansion Progress
The company is making steady progress on its new facilities in Mundra and Egypt. Approximately ₹130 crores has been spent on the Mundra plant, with a balance of ₹30 crores remaining. For the Egypt plant, ₹86 crores has been spent, with ₹40 crores remaining. The Egypt plant is expected to begin trial production and commercialization by January 2026, while the Mundra plant is targeted for commercialization by March 2026. These expansions are set to significantly enhance manufacturing capabilities.
Strategic Growth Drivers and Outlook
Management highlighted CNG and Industrial segments as primary growth drivers, with new applications emerging in industrial gases, defence, solar, and semiconductor sectors. Hydrogen development in India is seen as a complementary long-term opportunity, as high-pressure cylinders will be required for its storage and mobility. The company maintains a positive outlook for the next two years, driven by growing opportunities and a strong order pipeline.
Regulatory and Operational Challenges
An ongoing GST case, affecting the entire industry, is being pursued with representations to the government and a High Court case, with management hopeful for a positive outcome. The company also incurred a one-time📎 penalty of ₹11 crores for not meeting net foreign exchange earnings requirements for its SEZ plant over a five-year assessment period. While this was a one-time📎 payment, management is seeking amendments to SEZ rules to prevent future recurrences.
Order Book and Margin Commentary
The US subsidiary has an order book of $80 million, executable over 12-18 months. The total order book across all locations is approximately ₹1,000 crores, executable over the next year. The consolidated EBITDA margin for the quarter was 11.9%, below the guided range of 12-14%. This was attributed to a product mix shift, specifically a drop in high-value products, and higher operating costs in the US. Management expects margins to improve as CNG volumes pick up and the product mix normalizes.