JNK — Q3 FY25 earnings call

Call held 18 Feb 2025

Management summary

JNK India Limited reported a mixed Q3 FY25, with revenue declining sequentially to INR 96.9 crores and EBITDA margin compressing to 10.1% due to projects entering final execution phases and higher fixed costs. Despite this, 9M FY25 revenue grew by 16% YoY to INR 295.1 crores, supported by a robust order book of INR 1,226 crores. The company secured a new international order for Malaysia and received a credit rating upgrade, reinforcing its financial strength and long-term growth prospects, although FY25 revenue and margin guidance have been revised downwards due to project delays.

Highlights

  • 9M FY25 total revenue was INR 295.1 crores, reflecting almost a 16% year-on-year growth.

  • Order book as of December 31, 2024, was INR 1,226 crores, providing strong revenue visibility.

  • Secured a significant order in January 2025 from JNK Global Company Limited Korea for the Pengerang biorefinery project in Malaysia, marking JNK India's first order to Malaysia.

  • Credit rating upgraded by CRISIL in January 2025, with long-term rating improving to A- from BBB+ and short-term to CRISIL A2+ from CRISIL A2.

  • Working capital cycle improved, with Q3 interest costs at INR 20 lakh compared to Q2, indicating optimal utilization of working capital lines.

Concerns

  • Q3 FY25 total revenue reached INR 96.9 crores, reflecting a 9.7% sequential decline.

  • Q3 FY25 EBITDA margin was 10.1%, impacted by projects in final stages, fixed cost absorption, and higher employee benefit expenses including ESOP costs.

  • Q3 FY25 Profit after tax margin was 2.9%.

  • FY25 revenue target is expected to be reduced by approximately 10% due to project delays not under JNK India's control.

  • FY25 EBITDA margin guidance revised down to 12-13% from the initial 17-18%.

Key financials

2 periods

Q3 FY25

  • Revenue
    ₹96.9 Cr
    QoQ -9.7%
  • EBITDA
    ₹9.75 Cr
  • EBITDA Margin
    10.1%
  • PAT
    ₹2.8 Cr
  • PAT Margin
    2.9%
  • Interest Costs
    ₹0.2 Cr
  • Finance Costs
    ₹5 Cr

9M FY25

  • Revenue
    ₹295.1 Cr
    YoY +16%
  • EBITDA
    ₹37.3 Cr
  • EBITDA Margin
    12.7%
  • PAT
    ₹17 Cr
  • PAT Margin
    5.8%
  • ESOP Costs
    ₹7.51 Cr

What they filed

Q1 FY27: revenue up 65.7%, net profit up 1300.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue103 94 189 99 178 +73%179 +90%300 +59%164 +66%
EBITDA12 7 15 3 17 +42%25 +257%42 +180%17 +467%
Net profit7 3 13 1 14 +100%18 +500%32 +146%14 +1300%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Total value

₹1,226 Cr

as of 2024-12-31 quantified

Composition

Mix 5 products
  • Heating equipment 82%
  • Waste gas handling systems and process plants 18%
  • Cracking furnace 50%
  • Fired heaters 40%
  • Flares, incinerators, etc. 10%

Share of order book by product· categories overlap, and sum to 200%

Pipeline

qualified rfp

Bid pipeline for exports and domestic projects, including new product lines.

Cancellations & deferrals

  • deferred: Certain projects have been delayed due to reasons not under JNK India's control, leading to an expected 10% reduction in the FY25 revenue target.
The order book remains strong, providing good revenue visibility, despite some project delays impacting the current fiscal year's revenue target. The bid pipeline is robust for both domestic and international markets, including new product lines.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Debt disclosed
    • New borrowing Availed additional credit limits, increasing total credit facilities to INR 457 crores from INR 150 crores. ₹307 Cr
    Financial strength was further reinforced with an upgrade in our credit rating by CRISIL in January 2025. The long-term rating improved to A- from the earlier BBB+, while the short-term rating has been upgraded to CRISIL A2+ from CRISIL A2.

Guidance & targets

Revenue

  • FY25 Revenue Target Revenue · FY25 · Medium confidence Approx. 10% reduction from original target (INR 600-650 crores)

    Previously INR 600-650 crores → Approx. 10% reduction from original target (INR 600-650 crores)

    Now certain projects have got delayed due to various reasons, which are not under the control of JNK India. So we might suffer a reduction in the target by, say, 10%.

    — Pravin Sathe

  • Q4 FY25 Revenue Revenue · Q4 FY25 · Medium confidence INR 280-290 crores
    I mean, Aashna, just last 2 years, actually, if we see our historically, whatever we have delivered in 9 months revenue, the same revenue we have delivered in the last quarter as well, that is Q4. So that's our endeavor to do this year as well.

    — Arvind Kamath

Margin

  • FY25 EBITDA Margin Margin · FY25 · High confidence 12-13%

    Previously 17-18% → 12-13%

    Yes, somewhere around 12% to 13%.

    — Pravin Sathe

  • FY26 EBITDA Margin Margin · FY26 · Medium confidence 17-18%
    And in terms of the margin profile, yes, generally, traditionally, we have always told that our margin is anywhere around EBITDA of 17% to 18%, and that's the EBITDA we should be able to maintain going ahead as well.

    — Arvind Kamath

Working Capital

  • Working Capital Cycle Working Capital · Going forward · High confidence 120-130 days
    Going forward, we see working capital cycle somewhere between 120 to 130 days.

    — Pravin Sathe

Costs

  • ESOP Costs Conclusion Costs · End of FY25 · High confidence Conclude by end of FY25
    However, it is important to note that ESOP-related costs will conclude by the end of FY25, providing a clearer margin outlook going forward.

    — Arvind Kamath

  • Total ESOP Costs Costs · FY25 · High confidence INR 10 crores
    And for the entire year, it would be around INR 10 crores or so. So it's about INR 2.5 crores more in the last quarter.

    — Pravin Sathe

Order Book

  • Order Book Position Order Book · March end · High confidence Above INR 1,000 crores
    See, as on now, our order book position is INR 1,220 crores. So at the end of March end, so the order book position would definitely be above INR 1,000 crores.

    — Arvind Kamath

New Business

  • Green Hydrogen Vertical Revenue Contribution New Business · 3-5 years · Medium confidence 30% of total revenue
    So, see, typically, the green energy and the renewable energy is our focus. But currently, what we're doing is developing our expertise in this line so as maybe 3 to 5 years, we want that line to be at least, say, about 30% of our total revenue. That's our intention is.

    — Arvind Kamath

Project Execution

  • Reliance Order Execution Completion Project Execution · March 2026 · High confidence Next financial year
    The execution has already begun. We have already started booking some revenues as well, though they are small in nature but the execution completion is in the next financial year. ... Yes, March '26, correct. Yes.

    — Arvind Kamath

What to watch in Q4 FY25

Q4 FY25 Revenue Achievement

Next quarter (Q4 FY25 results)
Current INR 96.9 crores (Q3 FY25)
Target INR 280-290 crores

Why it matters

Verifies the management's expectation of a significant pick-up in execution and revenue recognition in the final quarter of FY25.

I mean, yes, that's our endeavor to achieve that similar -- that kind of a number in the last quarter.

Risks & concerns

  • Project Execution Delays

    medium

    Certain projects, particularly with PSUs and in remote sites, have faced delays due to external factors, leading to a ~10% reduction in the FY25 revenue target.

    Management acknowledged

  • Margin Pressure from Project Stage and Costs

    medium

    Q3 EBITDA margin was impacted as several projects reached final stages (lower revenue recognition), coupled with high fixed costs and increased employee benefit expenses, including ESOP costs.

    Management acknowledged

  • Delay in Russian Project Finalization

    medium

    Finalization of projects in Russia, which are part of the export pipeline, has been substantially delayed.

    Management acknowledged

Q&A highlights

8 direct
Q4 Execution and FY25 Revenue Target Revision Direct
Now certain projects have got delayed due to various reasons, which are not under the control of JNK India. So we might suffer a reduction in the target by, say, 10%.

Management clarified that the initial FY25 revenue target (based on opening order book) would be reduced by ~10% due to project delays, impacting investor expectations.

Asked by Mohit Kumar

FY25 EBITDA Margin Outlook Direct
This year, due to various reasons, due to increased cost increased direct cost also and increase in number of employees, post listing effect of the ESOP results, we see that the guidance would come down by 3 to 4 points. ... Yes, somewhere around 12% to 13%.

Management revised down the FY25 EBITDA margin guidance to 12-13% from the earlier 17-18%, citing cost absorption, higher employee benefits, and ESOP costs, which is a significant change in profitability outlook.

Asked by Mohit Kumar

Order Inflow Pipeline and Future Prospects Direct
Yes. Mohit, the pipeline looks actually very good, including India and exports, as we started off. ... So it could come in one of the quarters significantly and some quarters, it could be a bit slow. But yes, this quarter also, there is at least a finalization of two important opportunities.

Despite low Q3 order inflows, management provided confidence in a strong pipeline for both domestic (petrochemicals) and international (USA, Middle East) projects, indicating future growth potential.

Asked by Mohit Kumar

Order Book Hit Rate and New Business Opportunities Direct
So basically, the bid pipeline is around in terms of the value, it is about INR 4,000 crores for exports. And it's about INR 4,000 crores for the domestic as well. ... And our traditional hit rate has been around 20% or so in terms of the orders finalized, 20% to 30%.

Management quantified the bid pipeline at INR 8,000 crores and confirmed a 20-30% hit rate, providing clarity on potential future order conversions. They also mentioned new product lines like hydrogen plants and incinerators.

Asked by Charanjit Singh

Working Capital Cycle and PSU Collections Direct
See, typically, we have seen that our working capital cycle has been in the range of 120 to 140 days. At some stages, it got stretched up to 160 days also. But ideally, it should be around 120 days going forward. ... So in spite of the client being PSUs, we could now get after them somehow and push them to release our payments a little faster than what they used to be in the previous year.

Management indicated an improvement in working capital management, targeting 120-130 days, and better collection efficiency from PSUs, which is crucial for cash flow in the capital goods sector.

Asked by Mohit Jain

Royalty for Export Orders via JNK Global Direct
I mean, Varun, just whenever the order is received from JNK Global, they take care of their cost and whatever we bid, we receive the order at that price. So there is no separate loyalty to be paid to them. Like we already received our orders in this quarter as well for Malaysia that was from JNK Global. ... Only if we receive the order for exports directly from the customer, then we have to pay them up to 3% of the order value.

Clarified the cost structure for international orders, distinguishing between orders received through JNK Global (no separate royalty) and direct export orders (3% royalty), which impacts profitability on international projects.

Asked by Varun Mohanraj

Vision for Green Hydrogen Vertical Direct
So, see, typically, the green energy and the renewable energy is our focus. But currently, what we're doing is developing our expertise in this line so as maybe 3 to 5 years, we want that line to be at least, say, about 30% of our total revenue. That's our intention is.

Management outlined an ambitious long-term target for the green hydrogen vertical to contribute 30% of total revenue within 3-5 years, signaling strategic diversification into a high-growth area.

Asked by Varun Mohanraj

Impact of Suntech Infra Arbitration on Reliance Project Direct
That doesn't affect the execution timeline because we have already engaged another contractor to carry out the same work. And there, we have mentioned clearly in our disclosure also that there would not be significant financial implications out of this arbitration.

Management reassured that an arbitration petition related to the Reliance project would not impact execution timelines or have significant financial implications, mitigating a potential concern.

Asked by Anshul Jethi

3 min read 7 chapters

Detailed narrative

Q3 FY25 Performance and Margin Contraction

JNK India reported a sequential decline in Q3 FY25 revenue to INR 96.9 crores, down 9.7%. This was primarily attributed to projects reaching their final execution stages, which typically involve lower revenue recognition due to milestone-based billing. Consequently, the EBITDA margin compressed to 10.1% for the quarter, impacted by fixed cost absorption and higher employee benefit expenses, including ESOP-related costs. The Profit After Tax (PAT) margin for Q3 FY25 stood at 2.9%.

9M FY25 Overview and Strong Order Book

Despite the Q3 challenges, the company's 9M FY25 performance showed resilience, with total revenue reaching INR 295.1 crores, reflecting a robust 16% year-on-year growth. As of December 31, 2024, JNK India maintained a strong order book of INR 1,226 crores. This substantial order book provides significant revenue visibility and reinforces the company's execution pipeline for the upcoming periods.

Strategic International Order and Credit Rating Upgrade

A key highlight was securing a significant international order in January 2025 from JNK Global Company Limited Korea. This contract involves the supply of critical fire heaters for the Pengerang biorefinery project in Malaysia, marking JNK India's first entry into the Malaysian market. Furthermore, the company's financial strength was recognized by CRISIL, which upgraded its credit rating in January 2025, improving the long-term rating to A- from BBB+ and the short-term rating to CRISIL A2+ from CRISIL A2.

Revised FY25 Outlook and Margin Trajectory

Management indicated a revision to the FY25 revenue target, expecting a reduction of approximately 10% from the initial INR 600-650 crores due to project delays beyond their control. The EBITDA margin guidance for FY25 has also been adjusted downwards to 12-13% from the earlier 17-18%. However, the company is confident in achieving an EBITDA margin of 17-18% in FY26, as ESOP-related costs are expected to conclude by the end of FY25, providing a clearer margin outlook.

Robust Order Pipeline and Diversification Efforts

JNK India boasts a healthy bid pipeline, with approximately INR 4,000 crores each for export and domestic opportunities. The company's traditional hit rate for order finalization is around 20-30%. In terms of product mix, the current order book is dominated by heating equipment (82%), with cracking furnaces accounting for 50% and fired heaters for 40%. The company is also actively pursuing new product lines such as hydrogen plants, CBG units, and incinerators, with a pipeline of INR 200-250 crores in these emerging areas.

Working Capital Management and Cost Control

The company has shown improvements in its working capital management, aiming to maintain a cycle of 120-130 days going forward, down from previous stretches of up to 160 days. This is evidenced by reduced interest costs in Q3 FY25, which stood at INR 20 lakhs. While total finance costs were higher at over INR 5 crores, this included one-off charges like loan processing fees and stamp duty, amounting to approximately INR 2.75 crores, and bank guarantee charges of INR 85 lakhs.

Green Hydrogen Vertical Ambition

JNK India is strategically focusing on the green energy and renewable energy sector, particularly the green hydrogen vertical. The management expressed an ambition for this segment to contribute approximately 30% of the company's total revenue within the next 3 to 5 years. This long-term vision underscores the company's commitment to diversification and capitalizing on emerging market opportunities.

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