SC ruling helps Everest Kanto to rise steep amid threatening clouds of vehicular pollution in Delhi

Dark clouds of pollution hovering over the national capital region have been causing anxiety among the minds and souls of millions including top judges, politicians, bankers, investors and commoners. All of them are eagerly awaiting curative steps to be taken by the government agencies and one of those steps already initiated is converting all the taxis in NCR to CNG-driven vehicles. While this decision along with an endorsement of the apex court has brought smiles on the faces in the national capital, this development has also brought much cheer among the investors of Everest Kanto, a leading player in manufacturing of industrial and CNG cylinders. Everest Kanto on Wednesday is trading at its 52-week high.

The share price of Everest Kanto this month has climbed steep 63.2 per cent to Rs 16.83. The benchmark index BSE Sensex though has been marginally down 0.52 per cent during December 29.

At this point the investors might have questions running in their mind whether it worth is to buy this stock at current market price, if the recent happenings boost the company’s fundamental.

Let’s have a quick look on its financials even as the company has posted net loss during last three years of Rs 94 crore, 138 crore and 132 crore in FY15, FY14 and FY13 respectively. Even the company’s topline consistently declined during last five years from Rs 780 crore in FY11 to Rs 472 crore in FY15. Therefore, net worth of the company has consistently declined from Rs 818 crore in FY12 to Rs 392 crore in H1FY16. Currently, the company has a higher leverage with a total debt of Rs 490 crore as on September 30, 2015 i.e. debt to equity ratio Is around 1.25x.

As per its September 2015 shareholding pattern, the company’s promoter holding stands at 64.07 per cent out of which 48.81 per cent of its holding is pledged. On the valuation front, the company is currently trading at 0.46 of its book value of Rs 36.6 as on September 30, 2015. We believe the stock price should trade at such level of discount due to poor financial strength.

For short-term investors there is a possibility of gain and specially from the trading point of view while the long term investors are being suggested to keep away from this counter. After all, not all the clouds come with a silver lining!