Just finished listening to the EKC call - they have highlighted sharp drop in CV OEM volumes in June. I checked Tata Motors concall, the same has been clearly called out in their presentation and earnings call. In the LCV segment, CNG volumes have come down from 40% in FY22 to 26% in Q1 FY23 due to lack of price arbitrage between CNG and diesel. Tata Motors will keep a watch on how CNG v Diesel demand evolved and they are not concluding anything yet basis 1Q numbers.
Ashok Leyland in its earnings call has said that its seen some shift of LCV demand away from CNG into EVs also due to CNG prices.
So the short to medium term demand scenario for EKC in the auto CNG segment may be challenging. LNG supply chains are complex and if Europe and Russia can’t strike an agreement on resuming overland gas supplies before this winter, the LNG pricing in global markets may remain disrupted for an extended period of time as Europe buys more LNG.
Coming to the concall, several investors expressed their displeasure over lack of and poor quality of information/disclosures made by the company regarding its results - for e.g. a simple data on Cylinder volume trends or industry wise breakup of demand is not given by EKC. I agree with the same, its quite frustrating as an investor because with the lack of data, negative surprises are 100% possible like this one.
After having tracked this company for over a year now and listened to Management in 4-5 concalls, I am not able to trust the promoters here. I have learnt over this quarter, that trust in Management is paramount as an investor and its better to get out leaving potential money on the table but having peace of mind, if one can’t trust the Promoters. The company may be in a value zone right now in terms of price, but poor Managements can often reduce value, making companies value traps.
Disclaimer: This is not investment advice. Everybody is entitled to their personal opinions and I am sure there are many people here who remain bullish on EKC and the promoters and that’s perfectly fine. One reason I put down my thesis and my call in writing is also so that I can look back in the future and take learnings from my thought processes. I reserve the right to be 100% wrong.
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