EKI Energy Fundamental Analysis: Profit Potential or Pitfall?

From Data to Decisions: The Value of EKI Energy Fundamental Analysis. Founded by Dabkara, EKI Energy marked its entry on the SME platform of the BSE in April 2021, with an initial share price of Rs 140. Witnessing a remarkable surge, the company’s valuation reached an impressive Rs 3,114 by January 2022. This rise was largely driven by the increasing investor interest in the carbon-credit market.

But things went downhill quickly for the stock after the auditor’s report came out. The share price dropped a lot and hit its lowest point in a year, going down to Rs 355 on the BSE by May 30th. As of August 17- 2023, the stock concluded the day at Rs 454.00 on the BSE. This series of events showcases the inherent volatility in the market and the range of factors that can influence a company’s stock trajectory.

A big drop of around 80% in the share prices has made existing investors feel uncertain. However, the outstanding fundamentals and robust financials continue to attract both newcomers and experienced investors who are yet to test their fortunes with the company. This situation calls for the EKI Energy fundamental analysis thoroughly that goes beyond surface-level examination. When making long-term financial decisions, having adequate knowledge is truly crucial. This is because we need to approach- the situation with intellectual consideration, determining whether there is potential for profit or an approaching pitfall.

About The Company- EKI Energy Fundamental Analysis

EKI Energy Services Ltd. specializes in providing services related to energy, carbon, and quality management. Their main focus is on climate change and sustainability advice, along with carbon offsetting. They also offer services like ISO certification, management training in JIT/Kaizen, and electrical safety audits.

A notable achievement for the company was becoming the first from India to list a Plastic project with Verra, a global accreditation standard located in WA, USA. They also introduced a climate impact fund worth Rs. 1000 crores and launched India’s first Climate EdTech and Climate Finance company. In terms of revenue for the fiscal year 2022, the majority, around 99%, came from Climate Change & Sustainability Advisory and Carbon Offsetting services, while a smaller portion, approximately 1%, was from Community Based Projects.

In the previous fiscal year, FY21, the company successfully raised Rs. 18.6 Crores through an Initial Public Offering (IPO) by issuing around 18.2 lakh equity shares at a price ranging between Rs. 100 to Rs. 102 per share. As a significant step, the company transitioned from the SME platform to the Main Board of BSE Limited, showcasing its growth and expansion.

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What is Carbon Credit?

Carbon offsets, commonly referred to as carbon credits, are a component of programmes designed to lower overall greenhouse gas emissions in the environment. Carbon dioxide (CO2) and other greenhouse gases are a contributing factor in global warming and climate change.

Think of carbon credits as eco-friendly points earned by projects that help cut down on greenhouse gases, those things that heat up the planet. So, when a project, like planting trees or using clean energy, does a good job reducing these gases, it gets these carbon credits. Then, these credits are sold to folks or companies who want to make up for their own emissions. It’s kind of like balancing the scales. By getting these credits, we’re supporting cleaner ways of doing things and doing our bit to fight climate change. Just remember, while carbon credits are helpful, they’re not the whole solution. We also need to directly lower our own emissions.

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EKI Energy Services – Upcoming Projects

EKI Energy, First Source Energy to form JV for climate edtech, finance marketplace

The company have teamed up with First Source Energy India and its founders to create something pretty unique. It’s like a power-packed partnership aiming to make a difference in two big ways: climate education and climate finance. Imagine, EKI Energy Services Ltd, together with the eco-friendly experts at First Source Energy India Pvt Ltd, and their promoters, are diving into a new adventure. They’re getting together to start something cool – India’s first-ever “climate edtech” hub. Plus, they’re also stepping into the world of climate finance with a marketplace. They’re calling this adventure ClimaCool Projects & EduTech Ltd. It’s like a fresh breeze in the climate change world, and it’s all about making things better in an innovative way.

EKI Energy Joins Forces with Kochi Metro to Drive Carbon Credits Projects

On March 15, 2023, EKI Energy made a big move. They snagged a significant deal from none other than Kochi Metro Rail Limited (KMRL), a company that’s a joint venture between the Indian and Kerala governments. The deal? EKI Energy Services Ltd. (EKIESL) will be playing a major role. They’re stepping in to help out with some important stuff – think validation, registration, verification, and even trading of carbon credits projects for KMRL. This collaboration is like a green signal for more sustainability.

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What were the Auditor’s concern causing decline in the share price by almost 80%?

Why did the share price take such a nosedive, dropping almost 80%? The answer lies in the auditor’s concerns. In the December quarter of FY2023, the auditors raised some red flags that sent shockwaves through the stock market. But what were these concerns? Let’s dive in and unravel the mystery behind the significant price decline.

a) There were discrepancies in company’s revenue recognition policy.
b) Revenue recognition in contracts was not consistent with the Indian Accounting Standard (Ind AS) 115 standard.
c) Company did not fulfill its obligation of delivering carbon credits, under the existing arrangements and contracts.

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EKI Energy fundamental analysis- Essentials & Financials

Operating Revenue and Growth: EKI Energy Services boasts an operating revenue of Rs. 3,183.81 Crores over the past 12 months. What’s really impressive? Their annual revenue has shot up by a staggering 843%. That’s like a major leap forward in terms of growth.

Profitability and Ratios: When it comes to profitability, EKI Energy stands tall. Their Return on Capital Employed (ROCE) is an incredible 236%, and Return on Equity (ROE) is a solid 176%. That’s pretty remarkable in the market.

Price and Value: What’s the price tag on this stock? The Price to Earning Ratio is a modest 3.6, much lower than the sector’s PE ratio of 85.3. So, you’re getting value for your money.

Earnings and Debt: The stock’s EPS rank is 81, with the latest TTM EPS hitting an outstanding 125.76 Rs per share. And guess what? The Debt to Equity Ratio is a neat 0. That means the company’s assets are mostly backed by equity, which is a healthy sign.

Dividends and Yield: EKI Energy Services has got you covered. The current year’s dividend stands at Rs 20, and the yield clocks in at 1.12%. Not too shabby, right?

In a nutshell, EKI Energy Services seems to be quite the contender with impressive revenue, profitability, and favorable ratios. The lower PE ratio and solid earnings make it an intriguing choice. Plus, their healthy debt situation and dividends add extra points to their profile.

Shareholding Pattern

Promoter Holding Steady: As of the June 2023 quarter, the promoters’ ownership remains consistent at 73.42%. They’re holding their ground in the company’s ownership.

FII/FPI and Institutional Investors Selling: The story’s a bit different for foreign institutional investors (FII/FPI) and institutional investors. They’ve been reducing their stakes. In the same June 2023 quarter, FII/FPI holdings dropped from 4.69% to a mere 0.23%. Institutional investors followed suit, moving from 9.03% to the same 0.23%. It seems they’re lightening their load in the company.

The decline in investor confidence is a cause for concern, and there could be various possibilities contributing to this. Some of these include:

Market Sentiment Shift: A substantial reduction in holdings might indicate a change in sentiment among foreign institutional investors and institutional investors regarding the company’s future prospects.

Risk evaluation: Investors can be reevaluating the possible risks related to the business, its sector, or the general market environment, which would cause them to cut back on their exposure.

Performance Concerns: The decline in holdings could reflect concerns about the company’s recent performance, financial health, or growth trajectory.

To fully understand the reasons behind this decline, it’s advisable to look into any official statements from the investors or the company itself.

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Evaluating Financial Statements

The financial statements are the crucial aspects for the fundamental analysis of a company. When it comes to EKI Energy’s fundamental analysis, their significance is magnified due to prevailing negative sentiment surrounding the stock within the market.

Income Statements| Profit & Loss Statements

The Income statement of the company lays out a comprehensive view of its performance across a 5-year span, spanning from March 2019 to the trailing twelve months (TTM).

Revenue: EKI Energy showcased remarkable growth in revenue, with figures surging from a mere 20 crores in March 2019 to an exceptional 1,800 crores in March 2022, and further to 1,840 crores in the TTM period. To put this into perspective, this translates to a staggering surge of approximately 8800% from March 2019 to March 2022, and an impressive 9100% rise from March 2019 to the trailing twelve months.

Operating Profit: It has increased from just 1 crores in March 2019 to 516 crores in March 2022 and stands at 466 crores TTM. So, the operating profit rose by approximately 51500% from March 2019 to March 2022 and around 46500% from March 2019 to the trailing twelve months.

Net Profit: Over the period of 5 years, net profit increased from 1 crore in March 2019 to 383 crores in March 2022 and to 346 crores in TTM. The net profit rose by approximately 38200% from March 2019 to March 2022 and around 34500% from March 2019 to the trailing twelve months.

Earnings per Share: The figure of this metric increased from 34 Rs per share in March 2019 to 139.40 Rs per share in March 2022 and to 125.76 Rs per in TTM. The earnings per share rose by approximately 309.41% from March 2019 to March 2022 and around 269.88% from March 2019 to the trailing twelve months.

Dividend Payout %: For the past two years, the company is paying dividends to its shareholders.

Cash Flows Statements

When it comes to checking out how a company is doing financially and if it’s in good shape, you definitely want to pay attention to its cash flow numbers. Handling the finances of a company is a big deal and you should really know the process of cash inflows and cash outflows of a company. This can be done by evaluating the Cash flow statements of a company.

After the Auditor’s report incidence, it has become crucial to asses the Cash flow statements while analysing EKI Energy fundamental analysis.

Operating Cash Flows: Over a span of 5 years, the company’s cash flows from operating activities displayed remarkable growth, ascending from 0 crores in March 2019 to 30 crores in March 2022. The current year’s data is still pending, contributing to the evolving financial landscape.

Investing Activities Cash: Conversely, the company witnessed a substantial decline in cash from investing activities, plunging from 0 crores in March 2019 to -51 crores in March 2022. This decline points to a shift in the company’s investment strategies or projects.

Fluctuating Financing Cash: Cash from financing activities exhibited fluctuations within a range of -1 to 0 crores from March 2018 to March 2021. However, there was a subsequent improvement, reaching 14 crores in March 2022. This pattern suggests changing capital-raising approaches and financial priorities.

Net Cash Flows Variation: The company’s net cash flows also demonstrated fluctuation over the course of 5 years, ultimately settling at -6 crores in March 2022. This reflects the evolving balance between cash inflows and outflows, which could be influenced by factors like operations, investments, and financing decisions.

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Comparison Between Income Statements And Cash Flows Statements.

These two financial aspects are closely connected, and there’s an important detail to consider. When the cash coming in from operating activities is more than the Net Income, it’s a good sign. It means the company is really good at making money from its main business activities. This hints that the company has a strong chance of growing even more in the future.

In case of EKI Energy Services, Net profit stood at 383 crores in March 2022 and Cash Flows from operating activities stood at 30 crores in March 2022.

Perspective: If net profit exceeds cash flows from operations, the corporation may be recording revenues on paper but not having received the associated cash. The quality of earnings, possible non-cash costs, or the timeliness of cash collections may all be questioned if net profit is much greater than cash flows from operational operations.

Limitations Of EKI Energy Services- EKI Energy fundamental analysis

Declining Net Cash Flow: A concerning trend emerges as companies face challenges in generating net cash, impacting their financial health and operational capabilities.

Working Capital Days Surge: A significant shift is observed as working capital days escalate from 27.0 days to 69.6 days. This extended duration reflects potential issues in managing short-term assets and liabilities efficiently.

52-Week High Downturn: A notable drop is witnessed from the highest point in the last 52 weeks. This decline prompts the need for evaluation, encompassing factors affecting investor sentiment and market dynamics.

Highlights Of Earnings And Revenue For EKI Energy Services Ltd- Annual/Quarterly

Annual Performance: Impressive growth seen in annual revenue, surging by 843% to reach Rs 1,801.3 Crores. Net profit also soared by 1,950.6% to Rs 383.4 Crores.

Stock Performance: Stock price faced a decline of 73.3%, underperforming its sector by 89.4% in the past year.

Quarterly Trends: Quarterly revenue witnessed a decline of 40.9% YoY, totaling Rs 414.2 Crores. Net profit for the quarter fell by 76.4% YoY to Rs 38.1 Crores.

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BOTTOM LINE

Summing up EKI Energy fundamental analysis, have a look at these insights. It’s almost like flipping through the pages of a book filled with surprising plot twists. The yearly sales and net profit shoot up like bursts of fireworks, revealing the company’s shrewd decision-making. But, ah, the stock prices? They’ve taken us on a bit of a rollercoaster ride, with their ups and downs. And when we peek at the sales and net profit for each quarter, it’s like watching a delicate dance of changes unfold gracefully. The story of EKI Energy reads like a mixtape, weaving together both moments of triumph and challenges, much like a puzzle in the financial world that keeps rearranging its pieces.

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.