KRN Heat Exchan

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.

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.

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.

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.

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.

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.