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    KRN Heat Exchan

    KRNGood
    Capital Goods·6 Nov 2025
    Management Summary

    KRN Heat Exchanger reported strong Q2 FY26 results, with standalone revenue growing 126% and net profit up 95% YoY, driven by robust execution and demand across domestic and export markets. The company's new 6x capacity expansion, commissioned in May 2025, is ramping up, targeting 20% utilization this fiscal year. Strategic moves include the acquisition of an air-conditioning division and a focus on high-growth sectors like data centers and automotive HVAC, alongside efforts to increase export contribution to 50% in the next three years.

    Highlights

    8
    • Standalone total income for Q2 FY26 stood at INR 227.22 crores, a solid year-on-year growth of 126%.

    • Standalone EBITDA for Q2 FY26 was INR 29.60 crores, up 69% YoY.

    • Standalone net profit for Q2 FY26 almost doubled to INR 23.66 crores, a growth of 95% YoY.

    • Consolidated total income for Q2 FY26 was INR 154.46 crores, growing 67% YoY.

    • Consolidated EBITDA for Q2 FY26 increased by 67% to INR 30.25 crores.

    • Consolidated net profit for Q2 FY26 rose to INR 17.99 crores, up 46% YoY.

    • New capacity (6x expansion) commenced on May 30th, 2025, with a total capex of approximately INR 350 crores.

    • Targeting 20% capacity utilization for the new facility in FY26 and 50% in FY27.

    What Changed2

    vs Q3 FY26

    Guidance items8 → 15 (+7)Q&A highlights8 → 3 (-5)

    Key financials

    Single quarter

    06 metrics
    1. 01Standalone Total Income₹227.22 Cr+126%YoY
    2. 02Standalone EBITDA₹29.6 Cr+69%YoY
    3. 03Standalone Net Profit₹23.66 Cr+95%YoY
    4. 04Consolidated Total Income₹154.46 Cr+67%YoY
    5. 05Consolidated EBITDA₹30.25 Cr+67%YoY

    Guidance & targets

    15
    CategoryTargetPriority
    Industry Growth
    Commercial Air Conditioning Growth
    20-25%
    High
    Capacity Utilization
    New Capacity Utilization
    20%
    High
    Capacity Utilization
    New Capacity Utilization
    50%
    High
    Export Revenue
    Export Revenue Share
    50%
    High
    Acquisition Contribution
    Revenue from Bus Air Conditioning Acquisition
    INR 160 crores
    Medium
    Margin
    EBITDA Margin
    around 20%
    High
    Market Share
    Data Center Project Order Share (Visakhapatnam)
    at least 50%
    High
    Growth
    Growth from Existing OEMs (India)
    20-25%
    High
    Raw Material Sourcing
    Local Sourcing of Copper/Aluminum
    settle down
    Medium
    Incentives
    PLI Scheme Benefit
    receive
    High
    Incentives
    RIPS Approval
    have approval
    Medium
    Profitability
    PAT Improvement
    at least 1-1.5%
    Medium
    Capex
    Pending Capex for New Facility
    INR 25 crores
    High
    Solar Investment
    Solar Investment Operational
    operational
    Medium
    Solar Investment
    Solar Cost Advantage
    around half percent
    Medium

    Risks & concerns

    3
    RiskSeverity

    Raw material price volatility

    Management stated that while prices can fluctuate quarter-to-quarter, they can pass on the costs to customers in the next quarter, making it manageable.Analyst acknowledged

    medium

    Increased working capital due to new components

    The addition of new components (refrigeration, bar and plate, bus AC) requires maintaining a minimum stock level, leading to increased working capital, but expected to settle with SAP implementation and local sourcing.Management acknowledged

    medium

    Areas of Evasion(1)

    • Specific revenue guidance for FY26 from new capacity.

    Q&A highlights

    3

    “That is the same because mother company have raw material. So, he's sold to a subsidiary and subsidiary have, of course, revenue less, but once we console, then we have to reduce inter-company billing by auditor.”

    Clarified the reason for standalone revenue being higher than consolidated, attributing it to inter-company raw material sales to the subsidiary before the subsidiary generated significant external revenue.

    asked by Hardik Gandhi

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q2 FY26 Performance Driven by Growth Across Segments

    KRN Heat Exchanger reported a robust Q2 FY26, with standalone total income surging 126% YoY to INR 227.22 crores. Standalone EBITDA grew 69% to INR 29.60 crores, and net profit nearly doubled by 95% to INR 23.66 crores. Consolidated figures also showed strong growth, with total income up 67% to INR 154.46 crores and net profit increasing 46% to INR 17.99 crores, reflecting strong execution and sustained customer demand in both domestic and export markets.

    02

    New Capacity Ramp-up and Utilization Targets

    The company's significant 6x capacity expansion, involving a total capex of approximately INR 350 crores, commenced operations on May 30th, 2025. Management is targeting a 20% capacity utilization for this new facility in the current fiscal year (FY26), with an ambitious plan to reach 50% utilization in FY27. This expansion is expected to be a key driver for future growth, leveraging the company's enhanced manufacturing capabilities.

    03

    Strategic Acquisition in Automotive HVAC Segment

    KRN's subsidiary, KRN HVAC Products Private Limited, acquired the air-conditioning division of Spare Refrigeration Systems Private Limited. While the acquired entity had low historical revenue (INR 2-3 crores), the acquisition is strategic for its technology know-how, experienced team, and backward integration capabilities. Management projects this segment to contribute around INR 160 crores in revenue next year, capitalizing on the bus air conditioning market growing at 20-25% annually.

    04

    Focus on High-Growth Sectors and Export Expansion

    KRN is strategically targeting high-growth sectors such as data center cooling, automotive HVAC (bus, train, metro), and refrigeration. For the INR 50,000 crores Visakhapatnam data center project, KRN anticipates securing at least 50% of the estimated INR 1,500 crores heat exchanger requirement. The company also aims to increase its export revenue share to 50% in the next three years, with a particular focus on North America and Europe, while maintaining its strong presence in the UAE.

    05

    Margin Sustainability and Incentive Benefits

    Management reiterated its confidence in maintaining a sustainable EBITDA margin of around 20%. Future margin improvements are expected from government incentives, including the PLI scheme, which is anticipated to benefit the company from next year, and RIPS approval, expected within the next four to six weeks. Additionally, a planned solar investment, expected to be operational in the next two weeks, is projected to yield a cost advantage of approximately half a percent of revenue.

    06

    Working Capital and Raw Material Management

    The company noted an increase in working capital due to the addition of new components requiring minimum stock levels. However, management expects this to stabilize with the implementation of SAP and future local sourcing of raw materials like copper and aluminum, which is projected to settle down in the next six months. While raw material price volatility is a concern, KRN's ability to pass on cost increases to customers in the subsequent quarter helps mitigate this risk.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.