KRN Heat Exchanger and Refrigeration Limited Q3 FY26 Earnings Call Summary

Summary

KRN Heat Exchanger and Refrigeration Limited - Q3 FY 2026 Earnings Call Summary Monday, February 09, 2026 11:30 AM

Event Participants

Executives 3 Jitendra Kumar Sharma (Company Secretary), Santosh Kumar Yadav (Chairman and Managing Director), Sonu Gupta (Chief Financial Officer)

Analysts 8 Aditya Sharma (Individual Investor), Jitesh Thakur (Individual Investor), Manan Goyal (ICICI Securities), Manish Ostwal (Nirmal Bang Securities), Meet Shah (Finance 360), Mitesh Bhandari (Individual Investor), Mohit/Prateek (Subh Labh Research), Rajat G (Fortune), Tej Patel (Niveshaay Capital)

Financials & KPIs (Consolidated)

Geographic & Segment Commentary

• Domestic Market: Remains the primary growth driver, particularly in the data center segment where KRN serves almost all major HVAC suppliers. The company has moved to a L1 position with a new major client, strengthening its market dominance.
• Export Markets (USA & Europe): Significant focus on expanding geometry and tube diameter (from 7mm to 5mm) to improve cost-efficiency by 10%. Following tariff reductions in the USA, management expects order conversions to accelerate, supported by ongoing pilot orders and active RFQs.
• Middle East: Continued traction with a recent ₹20 crore single order from the UAE. While the market is smaller than the US/Europe, repeat orders from existing customers remain stable.

Company-Specific & Strategic Commentary

• New Facility Inauguration: The new manufacturing plant and office are scheduled for official inauguration on March 11, 2026. The facility has already added 40+ new customers, with 10–15 specifically in the bus air conditioning segment.
• Bus Air Conditioning (BAC): Following the acquisition of Sphere Refrigeration, KRN is leveraging 100% backward integration (heat exchangers, tubing, sheet metal, FRP). Management aims to capture 15% of the estimated ₹1,000 crore Indian BAC market next year.
• Backward Integration & R&D: New laboratory testing allows for product optimization, achieving the same cooling capacity at 10% lower costs. Shift to in-house manufacturing of headers and sheet metal through the HVAC subsidiary is boosting consolidated margins.
• Service Network Expansion: To support the BAC business, the company is establishing a PAN-India service network, targeting 20–25 service centers within the next 6–7 months.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Data Center Strategy

• Question: What is the competitive landscape and market share in data centers? (Tej Patel)
• Answer: KRN currently derives 15% of revenue from data centers, up from 7% YoY. The company is a supplier to almost all major HVAC players in India except one, where they recently secured an L1 bidding position. Management targets 50% share of the total Indian heat exchanger requirement for data centers due to their ability to manufacture large-scale coils (Santosh Kumar Yadav).

Bus AC Integration

• Question: How difficult is it to convert OEMs to KRN for Bus AC? (Prateek)
• Answer: KRN is already supplying to one OEM and expects to add 2-3 more this quarter. Competitive advantage stems from backward integration (heat exchangers and FRP in-house), allowing for better quality control and cost (Santosh Kumar Yadav).

Margin Dynamics

• Question: Why did standalone margins contract while consolidated margins expanded? (Meet Shah)
• Answer: Standalone margins are affected by inter-company billing of raw materials at cost. Consolidated margins are benefiting from the transition to higher-value products and the shifting of component manufacturing (header/sheet metal) in-house within the subsidiary (Santosh Kumar Yadav).

Inventory and Pricing

• Question: How does metal price volatility affect the order book? (Mohit)
• Answer: KRN maintains 2.5 months of inventory. Contracts are based on a quarterly average LME price. Price hikes are implemented every quarter (e.g., Dec 1st, then April 1st), which creates inventory gains during rising price cycles (Santosh Kumar Yadav).

Key Takeaway

KRN Heat Exchanger delivered a strong Q3 FY26 performance, marked by 33% revenue growth and a doubling of EBITDA, primarily driven by successful scaling and backward integration. The company has successfully diversified its revenue streams, with the data center segment now contributing 15% of sales and the new Bus Air Conditioning vertical securing its first OEM clients. Strategically, KRN is leveraging its new facility to move into complex assemblies and export-grade geometries, targeting a 10% cost reduction through R&D in tube diameters. Management remains confident in reaching 20% capacity utilization at the new plant by year-end and 50% in FY27. While raw material volatility persists, the company’s quarterly pass-through mechanism and high inventory levels provide a buffer. KRN is positioned to transform from a component supplier to a comprehensive cooling solutions provider as it inaugurates its new facility in March 2026.