Concall AI

KRN Heat Exchanger and Refrigeration Limited — Q2 FY26 earnings call

Call held 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

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.

Key financials

01 Standalone Total Income ₹227.22 Cr +126%YoY
02 Standalone EBITDA ₹29.6 Cr +69%YoY
03 Standalone Net Profit ₹23.66 Cr +95%YoY
04 Consolidated Total Income ₹154.46 Cr +67%YoY
05 Consolidated EBITDA ₹30.25 Cr +67%YoY
06 Consolidated Net Profit ₹17.99 Cr +46%YoY

What they filed

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

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	99	104	131	114	223 +125%	136 +31%	202 +54%	182 +60%
Expenses	81	88	111	95	194	119	184	157
EBITDA	18	16	20	20	30 +67%	17 +6%	18 −10%	25 +25%
Margin	18%	16%	15%	17%	13%	13%	9%	14%
Other income	2	3	1	3	4	5	3	2
Interest	1	0	1	1	1	1	1	1
Depreciation	1	1	1	1	1	1	1	1
Profit before tax	17	18	20	21	32 +88%	20 +11%	19 −5%	25 +19%
Tax rate	29%	30%	30%	25%	25%	25%	10%	25%
Net profit	12	13	14	16	24 +100%	15 +15%	17 +21%	19 +19%
EPS	1.95	2.04	2.21	2.52	3.81	2.43	2.71	2.85

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.

Guidance & targets

Industry Growth

Commercial Air Conditioning Growth Industry Growth · next 10 years · High confidence 20-25%

So, especially now commercial side growth is compared to room air conditioning is quite good. Room AC we believe around 10%, but commercial side around 20% to 25%.

— Santosh Kumar Yadav

Capacity Utilization

New Capacity Utilization Capacity Utilization · current year (FY26) · High confidence 20%

For new capacity, we are trying to like achieve 20% of capacity utilization, what we added.

— Santosh Kumar Yadav
New Capacity Utilization Capacity Utilization · FY27 (next year) · High confidence 50%

And 50% in FY27? Yes. Next year.

— Santosh Kumar Yadav

Export Revenue

Export Revenue Share Export Revenue · next three years · High confidence 50%

So, what we said in particular heat exchanger segment, finned and tube type, we will achieve 50% in the next three years.

— Santosh Kumar Yadav

Acquisition Contribution

Revenue from Bus Air Conditioning Acquisition Acquisition Contribution · next year · Medium confidence INR 160 crores

So, as per our plan it's around INR160 crores we are planning, but as of now like merge in same what we have told before.

— Santosh Kumar Yadav

Margin

EBITDA Margin Margin · sustainable · High confidence around 20%

So, EBITDA margin, I think this quarter was close to 20%. So, that is sustainable, that's what you are mentioning? Yes. That's my mistake gross and EBITDA.

— Santosh Kumar Yadav

Market Share

Data Center Project Order Share (Visakhapatnam) Market Share · High confidence at least 50%

So, as per my opinion heat exchange requirement will be I think INR1,500 crores for this project and we are expecting at least 50% of order to us, because especially data centre pooling requirement is a big heat exchanger and we can say proudly as of now we have only such facility to make big heat exchanger with good infra.

— Santosh Kumar Yadav

Growth

Growth from Existing OEMs (India) Growth · High confidence 20-25%

And additionally, we are adding new customer from especially for export for North America and Europe side. About refrigerator, because this is a new product for all three. So, we already started supplying for small OEMs or like also we approved by Havells recently, because Havells also going to start production for the refrigerator factory near to us from January this year, next year. So, we are expecting almost 20% to 25% growth from existing OEMs for India market.

— Santosh Kumar Yadav

Raw Material Sourcing

Local Sourcing of Copper/Aluminum Raw Material Sourcing · at least another six months · Medium confidence settle down

So, as per my personal opinion, it will take at least another six months to settle down the things because Hindalco is still not started. And MetTube and Adani have joint ventures.

— Santosh Kumar Yadav

Incentives

PLI Scheme Benefit Incentives · next year · High confidence receive

So, we are assuming PLI will benefit, we will receive next year for sure.

— Santosh Kumar Yadav
RIPS Approval Incentives · next four to six weeks · Medium confidence have approval

And RIPS, we already applied. So, hopefully next four to six weeks, we will have approval.

— Santosh Kumar Yadav

Profitability

PAT Improvement Profitability · next two or three years · Medium confidence at least 1-1.5%

So, if I club all at least for two or three years so we can have much much data, but what we are saying to market, we can try to improve at least one or one and one and a half percent of PAT, because other side about our depreciation and then these overheads will increase.

— Santosh Kumar Yadav

Capex

Pending Capex for New Facility Capex · High confidence INR 25 crores

However, what we, like I think already did or somewhat is pending around INR25 crores. So, it's tentatively around INR350 crores in new this capex. So, I think INR25 crore is still pending.

— Santosh Kumar Yadav

Solar Investment

Solar Investment Operational Solar Investment · next two weeks · Medium confidence operational

So, it will I think it will start maybe next two weeks for both.

— Santosh Kumar Yadav
Solar Cost Advantage Solar Investment · Medium confidence around half percent

So, then we will have at least benefit in terms of our, I think around half percent of saving we can say maybe in terms of revenue.

— Santosh Kumar Yadav

Risks & concerns

Raw material price volatility
medium

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
Increased working capital due to new components
medium

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

Areas of evasion (1)

Specific revenue guidance for FY26 from new capacity.

Q&A highlights

2 direct, 1 evasive

Difference between Standalone and Consolidated Revenue Direct

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

Revenue and Margin Potential from Recent Acquisition Direct

So, actually we bought spare refrigeration, bus air conditioning, but this company, I think revenue is not much, I think they top line only two, three crores. So, now our target is because we have backward integration in all competitors, we are now maybe number one and we see market is good and we have expertise, especially in heat exchanger, tubing, sheet metal, and then of course they have technology to work on this one and electricity. And market is growing at least 20% to 25%.

Revealed the acquired company's low historical revenue (INR 2-3 crores) and emphasized the acquisition's value in technology, team, and backward integration for the bus air conditioning segment, targeting INR 160 crores from this segment next year.

Asked by Mohit Chugh

New Capacity Ramp-up and FY26 Revenue Outlook Evasive

Again, actually, numbers, I can't comment much, actually. So, for that, honestly, this is a legal point, so I can't comment much. But capacity-wise and utilization-wise, I already, I think, answered.

Management declined to provide a specific revenue guidance for FY26 despite the significant 6x capacity expansion and analyst's calculation of INR 750-800 crores, citing 'legal points'.

Asked by Mohit Chugh

2 min read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

View original transcript