Systemix Shares & Stocks has initiated coverage on Everest Kanto Cylinder with a Buy rating, and a price target of Rs 395.
A report released on July 2 said: "Everest Kanto Cylinder (EKC) is a leader in the industrial and CNG cylinders manufacturing business in India. It commands an overall market share of 85% in CNG cylinder industry & is well placed to tap the growing market for environment-friendly Compressed Natural Gas (CNG) applications.
"We believe EKC offers an excellent play on the global CNG opportunity. We expect the demand for CNG cylinders in the domestic market to increase with the Supreme Court mandating the use of CNG as auto fuel for heavy vehicles in 28 highly polluted cities. The global CNG cylinder market is also set to increase on the back of firm oil price outlook and we believe that this will rub off positively for EKC which derives about 70% of its revenues from the CNG segment.
"EKC is ramping up its capacity to enhance its market share and is also planning to exploit other markets such as Iran and China, where a well timed capacity expansion would drive a ~36.8% EPS CAGR over FY08-FY10E. We initiate our coverage on EKC with a ‘BUY’ rating & with a price target of Rs 395."
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