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Emerging companies - Mid caps that can become large cap
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go4lalit
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Quote go4lalit Replybullet Topic: Everest Kanto - Firing on all Cyllinders
    Posted: 08/Sep/2006 at 1:55pm
Everest Kanto Cyllinder - Looked like an interesting company to me. It can become a proxy to play CNG/Energy sector. Basant, Have you analyzed this company?
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Quote basant Replybullet Posted: 08/Sep/2006 at 6:16pm
Excellent concept. Will try and fill in with the details.
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Quote basant Replybullet Posted: 13/Sep/2006 at 10:02am

Everest Kanto – Firing on all cylinders

We talked about Everest Kanto when it was around Rs 380 – Rs 400. The stock seems to have gone up a bit from there and is presently trading at Rs 437.This Company is another great play on the Indian CNG/LPG market. Earlier we had discussed about Indraprastha Gas and Everest Kanto is a logical extension of that.

The new Supreme court orders and the rising differentials between crude and gas has led to a rapidly expanding CNG & LPG market. Everest is the largest producer of cylinders in India and is also holds the majority market share for cylinders in Pakistan.

The company has launched a capacity expansion. set up a plant at Gandhidham (Gujarat) with a capacity of 340,000 cylinders per annum. This facility shall increase capacity be almost 50%.. The proximity of the plant to the ports and refineries shall provide logistic convenience to the company. The total capacity of the company would thus increase to 706,000 cylinders per annum

 

The company is setting up greenfield ventures in Dubai and China to take advantage of the demand in the Asian region.

 

Financial Synopsis

CMP

Rs 437

Market cap

Rs 771.22 crores

Sales Fy 07 (E)

Rs 360 crores

EPS Fy 07 {E}

Rs 24.00

Sales Fy 08 (E)

Rs 540 crores

EPS Fy 08 (E)

Rs 36.00

PE FY 07

18.21

RoE

35.05%

Post the Gujarat expansion the top line should grow at 50% in Fy 08 and the bottom-line could grow even faster. The high RoE indicates efficient use of capital. General brokerages expect sales to increase by 40% I have been aggressive with my estimates since these companies always surprise investors on the upside. Even if earnings increases come in  a little slower the stock would remain a good bet also.

Inspite of being short with CNG gas stations Delhi and the NCR (National capital region) have made a great shift towards that. Initially it was like a chicken and the egg race. Automobiles were not converting because there were no gas stations and there were no gas stations because automobiles were not converting .But these are temporary glitches change very soon as we have seen in other industries as well.

The CNG auto cylinder market is the fastest growing. The scale of opportunity is huge and Everest is already supplying to various countries across the globe. Exports make over a third of the company’s sales. The company is consistently trying to tap the overseas market and growth will come from both the domestic and international markets.

On the other hand the industrial segment which is another consumer of cylinders is showing buoyancy as manufacturing activities increase.

Recommendation: The huge scope of opportunity and the near dominant monopoly status of Everest Kanto makes it a  very interesting investment bet. At a market cap of about Rs 771 crores and a price of Rs 437 investors should think of adding this scrip at current prices and declines with a long term perspective.

 



Edited by basant - 13/Sep/2006 at 10:08am
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Quote Equity Buff Replybullet Posted: 13/Sep/2006 at 11:38am

Dear Basant,

I agree with you. This stock can give very good returns in the long term.
A leading brokerage also has come out with a buy report on the stock recently. Eps for FY 08 Rs. 35. It think the market can give it a p/e of 20 times atleast. I a years time this stock can be at Rs. 700.00. Expected ROE
for FY 08 is also healthy at 23%.
 
Rgds
Equity Buff
 
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Quote PKB2000 Replybullet Posted: 14/Sep/2006 at 7:53pm
Alas Looking at short term view I have just sold Partially after the market returned from 12K mark and the CLSA bala bla bla----. though have the money preserved for that only in future! If it gives me opprtunity to reenter at lower price! Excuse me for that.
SIR WHY DID U NOT POST UR VIEW LAST NIGHT AT LEAST!
I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso
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Quote kulman Replybullet Posted: 14/Sep/2006 at 8:05pm
PKB2000 Saab
 
I would seriously suggest you to change your TV set, buy a second-hand set with NO VOLUME function. Just watch stock tickers.....use it as a display, no sound. Never ever listen to those "analysts" either firangis or our own.
 
This way you will make/save lots of money!
 
Life can only be understood backwards—but it must be lived forwards
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Quote basant Replybullet Posted: 14/Sep/2006 at 8:10pm
PKB Sir - time and not timing is the key to making money. Look what happened to the investors who had gone into 30% cash after the fall in June.
 
 


Edited by basant - 14/Sep/2006 at 8:14pm
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Quote PKB2000 Replybullet Posted: 14/Sep/2006 at 8:21pm
Sorry!
Wish to change my deeds of doing the same things and expecting different result!
I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso
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