Everest Kanto Cylinder: Navigating Q2 FY26 with Strategic Expansions and Future Growth Drivers

Everest Kanto Cylinder Limited (EKC), a prominent player in the clean energy solutions sector and a leading global manufacturer of seamless steel gas cylinders, recently released its Q2 FY26 and H1 FY26 financial results. The quarter presented a mixed bag of performance, marked by strategic advancements alongside temporary headwinds. The company reported consolidated revenues of 360.4 crore for Q2 FY26, with an EBITDA of 42.9 crore, translating to an EBITDA margin of 11.9%. Profit After Tax (PAT) for the quarter stood at 13.7 crore. For the first half of FY26, consolidated revenues grew by 5.2% YoY to 747.3 crore, with EBITDA increasing by 10.1% to 104.2 crore, and PAT at 65.2 crore.

Despite the top-line growth in H1, Q2 FY26 saw some profitability challenges. The consolidated PAT declined by 64.6% YoY, largely influenced by an exceptional one-time loss of 11.29 crore. This loss stemmed from a penalty related to not completing net foreign exchange earnings in the company's SEZ plant, based on a five-year assessment. Additionally, the EBITDA margin moderated from 14.5% in Q2 FY25 to 11.9% in Q2 FY26, attributed to lower dispatches and increased operating costs. The domestic CNG segment experienced a short-term softness in volumes due to a GST transition in the end-user automotive industry, although this situation has since normalized. Margins in the US business were also affected by higher operating costs and strategic investments in strengthening teams and capabilities for future scale-up.

Strategic Expansions and Global Footprint

EKC's strategic vision remains firmly focused on expanding its manufacturing capabilities and global reach. The company is making significant progress on its new facilities in Mundra, India, and Egypt. The Mundra plant, with a total capex of approximately 160 crore (130 crore already spent), is on track for commercialization by March 2026. Similarly, the Egypt plant, involving a capex of around 126 crore (86 crore already spent), is preparing for trial production and is expected to commence commercial operations by January 2026. These expansions are poised to significantly enhance EKC's manufacturing capacity, enabling it to cater to a broader spectrum of domestic and international opportunities. The management anticipates these new plants to contribute substantially to future revenues, with Mundra projected to add around 200 crore and Egypt about 100 crore.

Geographically, EKC demonstrated resilience. The UAE business recorded a 4.5% YoY growth in Q2 FY26, reaching 40.7 crore. The US business, while experiencing lower dispatches in the quarter, maintained a healthy performance for H1 FY26, with a strong order book of 80 million USD providing visibility for the next 12-18 months. The India business also showed robust growth, increasing by 7.9% in H1 FY26 to 469.3 crore. The overall order book across all locations stands at approximately 1,000 crore, executable over the next year, underscoring strong demand for EKC's products.

Future Growth Avenues: Hydrogen and Industrial Gases

Looking ahead, EKC is strategically positioning itself to capitalize on emerging market trends, particularly in the hydrogen economy. The management acknowledges the significant government push and ongoing projects in hydrogen development in India, viewing it as a complementary growth driver. Given that hydrogen storage requires high-pressure cylinders, EKC's core expertise aligns perfectly with this burgeoning sector. The company plans to explore all product lines related to hydrogen, from mobility to ground storage, as the ecosystem develops.

Beyond hydrogen, EKC is also witnessing growing opportunities in various industrial applications. New avenues are emerging in sectors such as semiconductors, solar energy, and defence, where specialized industrial gases and high-pressure cylinders are critical. This diversification into high-growth segments, coupled with its established presence in the CNG market, positions EKC for sustained growth. The management expressed a positive outlook for the coming two years, confident in its operational excellence, capability development, and ability to support customers across geographies.

Outlook: Building for the Next Phase of Growth

Everest Kanto Cylinder Limited's Q2 FY26 results reflect a period of strategic investment and adaptation to market dynamics. While short-term profitability was impacted by an exceptional loss and temporary market conditions, the underlying narrative points to a company actively building for its next phase of growth. With significant capital expenditures directed towards new, state-of-the-art manufacturing facilities, a strong order book, and a proactive approach to emerging sectors like hydrogen and advanced industrial applications, EKC is laying a solid foundation for future expansion. The management's guidance of 12-14% EBITDA margin and standalone revenue of 900-1,000 crore, along with clear timelines for new plant commercialization, reinforces a confident and forward-looking strategy.