As India is suffering from a bad phase of coronavirus pandemic, a sudden demand for oxygen has been rising. As a result, the companies that produce oxygen or have the word “oxygen” in their names, are witnessing a strong rally in the stock market.
Due to the increase of COVID 19 patients in Mid April, the demand for medical oxygen rises, which in turn forces the central government to supply oxygen across the country.
Several reports indicate that there is an acute shortage of medical oxygen in the country and many hospitals are struggling to find enough oxygen for the patients.
As a result, the centre took immediate action by banning the supply of medical oxygen for industrial purposes and turned the supply into an essential public health commodity.
Several green corridors have been established to aid the rapid supply of oxygen through oxygen Express trains.
Impact on Stock Market After Witnessing a Strong Oxygen Rally
The rising demand for oxygen among Indian patients increases the shares of the companies that produce oxygen or have the word oxygen in their names.
For instance, National Oxygen Limited, Bombay Oxygen Limited and Bhagwati Oxygen - all the firms which are unlisted on the stock exchange - have experienced a sharp rise of 47% in April despite rising uncertainty and weakness in economic health.
From all the above points, one thing is clear that investors are keen to invest in the companies who supply medical oxygen to book good profits till the deficiency of oxygen lasts.
Meanwhile, some investors have mistakenly invested in the companies who have to do nothing with the oxygen, just have oxygen in their names. For example, Bhagwati Oxygen and National Oxygen Ltd are the producers of medical oxygen but Bombay Oxygen has ended its gas operations in 2019. Now it is a Non-Banking Finance Corporation.
Bombay Oxygen Investments Ltd was earlier known as Bombay Oxygen Corp Ltd. During the second wave of Covid 19, the shares of the company have gone up by 110 per cent at the beginning of April.
Here are some oxygen stocks witnessing a Strong Rally amidst the second phase of Covid 19:
1. Bombay Oxygen Investments Ltd:
Bombay Oxygen Ltd is a Non-Banking Finance Corporation (NBFC), that has ended its gas production in 2019. Now the company’s name is Bombay Oxygen Investments Ltd.
The company has a low return on equity of -2.52% for the last 3 years.
The company’s compounded sales for the last 5 years is -32.
The company is nearly debt-free.
The market capitalization of Bombay Investments Ltd is Rs 350.19 Crore.
2. National Oxygen Limited
National Oxygen Limited is an Indian company, primarily produces industrial gas such as Oxygen and Nitrogen.
The company has a market capitalization of Rs 30 Crore.
The 5 years compounded profit growth of the company was 13%.
The company has delivered a poor sales growth of 9.32% in the last 5 years.
Ratios as of March 20 are as follows:
ROCE: 9.85%
Debtors Days: 40
3. Gagan Gas Ltd:
Gagan Gas Ltd is a distributor of fuel gas companies mainly known as LPG have also gone up by 53 % in the last month, despite not having any news of producing oxygen gas.
The CAGR of the company before the second wave of COVID 19 is -10%.
The market capitalization of Gagan Gas is Rs 4 Crore.
For the last 3 years, the company has a low return on equity of 8.57%.
Compounded sales and profit growth for the past 5 years was -4% and -15%.
4. Bhagwati Oxygen Ltd:
Bhagwati Oxygen is a manufacturing company with the main focus on manufacturing industrial gases such as Oxygen and Nitrogen.
The company has a market capitalisation of Rs 4 crore.
The company has a low return on equity of 5.65% for the last 3 years.
As of March 2020, the company has high debtors of 369.87 days.
5. Everest Kanto Cylinder Limited
Everest Kanto Cylinder is India’s largest player in high-pressure gas cylinders with a market share of around 50%. The company has around 150 strong client base from numerous vertices including automobile OEM, city gas distribution, cylinder cascades, medical sector, defense including Bajaj Auto, Hyundai, Toyota, Adani Gas and more.
As per the acute shortage of oxygen cylinders amid the second wave of Covid 19, the company has expected to see a huge demand in its medical equipment segment.
The company has a market cap of Rs 1500 Crore.
The return on equity of the company for the last 3 years is 5.76% which is considered low.
The company has delivered a poor sales growth of 10% over the past 5 years.
6. Linde India Ltd:
Linde India Ltd formerly known as BOC India Ltd is a gas manufacturing company. The stock price has gone high in the past month whereas the stock’s CAGR before the second wave of Covid 19 is registered as 55.3%.
The market cap of Linde India ltd is Rs 15,943 Crore.
The company has had a low return on equity of 5.65% for the last 3 years.
The company is also debt-free.
The CAGR ratio of the company for the past 5 years is 52.75%.
Country’s Oxygen Crisis
The country’s sudden demand for oxygen gave a sharp rise to the oxygen-related stocks that has been driven by the scarcity of the commodity over the past few weeks.
According to several reports, oxygen production has been increased across the country to deal with the COVID 19 infected people.
Due to an excessive shortage of oxygen, the prices of oxygen cylinders in many parts of a country have more than doubled.
Conclusion
The rising demand for oxygen cylinders during the second wave of pandemic uplifted the company’s stock’s prices to a greater extent. However, many research analysts said that the rally of oxygen stocks to be short-lived as the demand for oxygen stocks is influenced by short term liquidity. Hence, it is suggested to check the fundamentals of the company before making any decision in the stock market.
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