KRN Heat Exchan

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.

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.

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.

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.

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.

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.

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%.