KRN Heat Exchanger and Refrigeration Limited — Q1 FY26 earnings call

Call held 1 Aug 2025

Management summary

KRN Heat Exchanger reported a strong Q1 FY26 with consolidated total income of INR118.86 crores and net profit of INR12.42 crores. Standalone performance was robust, with revenue growing 18.65% YoY and net profit surging 34.85% YoY. The quarter saw the commencement of operations at the new Neemrana facility and PLI scheme approval for its subsidiary, positioning the company for future growth, particularly in exports and energy-efficient systems.

Highlights

  • Consolidated Total Income stood at INR118.86 crores.

  • Consolidated EBITDA was INR17.59 crores, representing a 15.26% margin.

  • Consolidated Net Profit reached INR12.42 crores, with a 10.45% margin.

  • Consolidated EPS for the quarter was INR2.

  • Standalone Total Income grew 18.65% YoY to INR117.14 crores.

  • Standalone Net Profit surged 34.85% YoY to INR15.69 crores, with a 13.39% margin.

  • Overall revenue growth was 20.36%, driven by domestic (17.27% YoY) and exports (39.04% YoY).

  • New Neemrana Manufacturing Facility commenced commercial operations on May 31, 2025.

Key financials

  1. Consolidated Total Income ₹118.86 Cr
  2. Consolidated EBITDA ₹17.59 Cr
  3. Consolidated EBITDA Margin 15.3%
  4. Consolidated Net Profit ₹12.42 Cr
  5. Consolidated Net Profit Margin 10.4%
  6. Consolidated EPS ₹2
  7. Standalone Total Income ₹117.14 Cr +18.6%YoY
  8. Standalone EBITDA ₹19.79 Cr +16%YoY
  9. Standalone EBITDA Margin 17.3%
  10. Standalone Net Profit ₹15.69 Cr +34.8%YoY
  11. Standalone Net Profit Margin 13.4%
  12. Standalone EPS ₹2.52

What they filed

Q1 FY27: revenue up 59.6%, net profit up 18.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue99 104 131 114 223 +125%136 +31%202 +54%182 +60%
EBITDA18 16 20 20 30 +67%17 +6%18 −10%25 +25%
Net profit12 13 14 16 24 +100%15 +15%17 +21%19 +19%
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.

Segment breakdown

Share of Revenue
₹115.28 Cr Total
  • Domestic ₹96.39 Cr 83.6%
  • Avarthi's (Export) ₹18.89 Cr 16.4%

Guidance & targets

Capacity

  • New Facility Capacity Utilization Capacity · Q3/Q4 FY26 · High confidence 25%
    So, as I said, I think same question. However, I can maybe reply again. It will start from third of this quarter, like third and fourth of this year. So, Q3 you can get.

    — Santosh Yadav, Chairman and Managing Director

  • New Facility Capacity Utilization Capacity · next year (FY27) · High confidence 50%
    And then next year is around 50% and then three years from now you can say almost 80% we can utilize from new facility.

    — Santosh Yadav, Chairman and Managing Director

  • New Facility Capacity Utilization Capacity · in three years · High confidence 80%

    — Santosh Yadav, Chairman and Managing Director

Market Share

  • Export Share Market Share · next 3 years · High confidence 50%
    So, we're targeting in next 3 years, we're able to achieve at least 50% of export from our own existing product.

    — Santosh Yadav, Chairman and Managing Director

Profitability

  • Margin Improvement (from PLI/RIPS/new tax scheme) Profitability · from next year (FY27) · Medium confidence 1-2%
    But from next year, we will be able to increase 1% or 2% on existing product due to these PLI and then RIPS and then new income tax scheme and these things.

    — Santosh Yadav, Chairman and Managing Director

Revenue

  • Data Center HVAC Market (Google project) Revenue · this project · Low confidence INR1,000 crores
    I am expecting I think 10% of HVAC system. That is not -- I don't have any data, I am just assuming my own experience. So, I think the data center can be 10% of HVAC system. So, maybe it's roughly INR1,000 crores I think only this project.

    — Santosh Yadav, Chairman and Managing Director

Regulatory

  • RIPS Approval Regulatory · Q1 FY26 · High confidence within this quarter
    So, hopefully, we will get within this quarter from RIPS approval. And then we can get like incentive. We can start from third quarter of this year.

    — Santosh Yadav, Chairman and Managing Director

  • PLI Incentive Regulatory · FY27 · High confidence from next year
    And then good numbers you can expect from next financial year because this RIPS policy we will be able to get, I think from third quarter and this PLI also from next year.

    — Management

Risks & concerns

  • Pressure on Q1 FY26 earnings due to HVAC segment and new plant expenses

    medium

    Management stated that Q1 FY26 will be under pressure due to HVAC segment performance and expenses related to the new facility, impacting income and margins.

    Management acknowledged

  • Delay in new Neemrana facility commencement

    low

    The new facility's commercial operations were delayed by almost two months, starting on May 31, 2025, which impacted initial ramp-up and revenue contribution.

    Management acknowledged

  • Impact of US tariffs on demand

    low

    Management believes there will be no significant impact from US tariffs as they have few regular customers in the US and their products are competitive even with duties.

    Analyst downplayed

Areas of evasion (3)

  • exact FY26 revenue numbers
  • capitalization amount for new plant
  • breakdown of other expenses

Q&A highlights

2 direct
Intellectual Property (IP) generation from the new Thermotech Research Lab Direct
So, actually IP we cannot get from lab. But we can get on our products. So, it will be work like that. If I want to, like, some specific particular tube with different geometry... So, slowly we can work on IP side.

Clarifies the strategic use of the new lab for product innovation and IP development rather than direct lab IP, outlining a path to competitive advantage.

Asked by Jai Chauhan

Ramp-up and revenue contribution from the new Neemrana facility Partial
So, hopefully, we assuming this quarter, we will have all customer approvals, quality system, manpower training and all things all set and from third quarter, we will of course ramp up in production and then third and fourth quarter, we will have good numbers from new facility.

Provides a timeline for the new facility's contribution to revenue, indicating a lag in financial impact for the current quarter, but defers specific revenue numbers.

Asked by Manish Ostwal

Current debt profile Direct
So as of now like this term loan we are very less around INR2 crores and we are working capital only. So it's -- because we have some FD so as of now you can say we are in position almost zero as of now.

Confirms a very low net debt position, indicating strong financial health and minimal leverage.

Asked by Sanjay Nandi

2 min read 7 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

KRN Heat Exchanger reported a consolidated total income of INR118.86 crores for Q1 FY26, achieving an EBITDA of INR17.59 crores (15.26% margin) and a net profit of INR12.42 crores (10.45% margin), with an EPS of INR2. On a standalone basis, total income grew 18.65% year-on-year to INR117.14 crores, with EBITDA increasing 16.02% to INR19.79 crores (17.30% margin). Standalone net profit saw a sharp rise of 34.85% to INR15.69 crores (13.39% margin), yielding an EPS of INR2.52.

New Neemrana Manufacturing Facility Ramp-up

The company successfully commenced commercial operations at its Neemrana Manufacturing Facility on May 31, 2025. Management expects the facility to achieve 25% capacity utilization in Q3 and Q4 FY26, ramping up to 50% in FY27 and almost 80% within three years. Customer approvals and quality system certifications are underway, with production ramp-up anticipated from the third quarter of this year, contributing 'good numbers' to revenue.

PLI Scheme and Export Strategy

KRN's subsidiary secured approval under the PLI scheme for white goods, with a sanctioned incentive of INR141.72 crores. This incentive, along with the RIPS approval expected within Q1 FY26 (incentives from Q3 FY26), is projected to improve margins by 1-2% on existing products from next year. The company aims to increase its export share to 50% from its current 16.4% (INR18.89 crores in Q1 FY26) within the next three years, leveraging the new facility's capacity.

Thermotech Research Lab and IP Strategy

The new Thermotech Research Laboratory, a wholly-owned subsidiary, is set to become the first AHRI-approved lab in India, with equipment expected by next week and full operational readiness by September/early October. This lab will focus on product innovation, enabling KRN to develop more efficient heat exchangers with unique geometries and file patents on these advancements, thereby building a competitive moat.

Industry Outlook and Data Center Cooling Opportunity

Management highlighted significant opportunities in data center cooling, citing Google's INR50,000 crores investment in India, with an estimated INR1,000 crores potentially allocated to HVAC systems. KRN, as an expert in larger commercial heat exchangers, is well-positioned to capitalize on this demand, as well as opportunities in heat pumps and gas heating. The overall heat exchanger market size is estimated to be over INR4,000 crores.

Debt Profile and Financial Health

The company reported a very low debt profile, with term loans around INR2 crores and working capital only. Management stated that with existing fixed deposits, the net debt position is 'almost zero as of now,' indicating a strong and healthy balance sheet, which minimizes financial risk.

District Cooling Centers and KRN's Market Position

KRN views the emerging trend of district cooling centers as a positive development. While the company does not supply to the room AC market, it specializes in larger commercial heat exchangers, which are essential components for district cooling systems (e.g., water-cooled or air-cooled chillers, air handling units, fan coil units). Management believes this trend will increase their market share in the relevant segments to over 60-70%.

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