KRN Heat Exchanger and Refrigeration Ltd Q1 FY27 Earnings Analysis

- The company is targeting significant revenue growth, aiming for Rs.2,250 crores to Rs.2,850 crores in the near future (FY28/FY29 timeframe). - New facility utilization expected to rise from 50% in FY27 to 80% in FY28, driving faster capacity ramp-up. - Data center segment revenue is growing rapidly, currently around 19%, expected to increase quarter-on-quarter with strong order booking including exports. - Bus Air Conditioning (Bus AC) segment is expected to contribute Rs.150 crores with around 15% market share, backed by ongoing OEM supply. - Export business is anticipated to nearly double compared to last year, especially in data centers, targeting North America, Europe, and UAE markets. - Eight to nine new products from the new facility, along with existing product growth and new customers, will fuel incremental revenue. - Overall revenue growth supported by expanding product portfolio, higher capacity utilization, and export market traction.

- The company expects quarter-on-quarter revenue growth in coming quarters, driven by ramp-up of new facility and increased capacity utilization, with highest ever performance anticipated over next eight quarters (Page 15). - There is confidence in achieving Rs.150 crores revenue from the Bus AC segment backed by order books and regular supply (Page 15). - Data center business shows strong momentum with 16-19% revenue contribution; expected to increase quarter-on-quarter, though exact future percentage is yet to be calculated (Page 17). - Export business, particularly data center orders, is expected to almost double this year, supporting margin and profit growth (Pages 13, 17). - Margins are expected to improve due to government incentives such as 5% PLI and RIFS approvals, export growth, and solar power savings, despite higher depreciation and overhead (Page 11). - Slight gross margin improvement expected from scale and vendor negotiations, but raw material price volatility (copper/aluminum) poses near-term pressure (Page 19).

- Existing major CAPEX is completed, including building, land, and utilities; facility is ready for utilization (Page 14). - Slight additional investment planned for line balancing and adapting existing facility for new geometry, especially to support data center products (Page 14). - Planned CAPEX over next two years estimated at approximately Rs. 30-40 crores, mainly towards existing facility enhancements (Page 14). - New plant utilization expected to ramp from 50% in FY27 to 80% in FY28 (Page 11, 18). - Potential capital raise via QIP up to Rs. 500 crores is approved, primarily for working capital needs; final utilization under consideration (Pages 7, 19). - Backward integration ongoing in bus AC segment, covering fin and tube heat exchangers and microchannel units (Page 6).

- The company has approved a Qualified Institutional Placement (QIP) of up to Rs. 500 crores but the exact amount and utilization are yet to be finalized. - Management indicated the primary reason for potential fundraising is to bolster working capital requirements to support growth. - There is no certainty that the full Rs. 500 crores will be raised; it is an enabling resolution. - They are also considering other options like bank debt for working capital but the final decision will be made by the board. - The management will provide more clarity on fundraising plans in the coming weeks once decisions are concluded.

- Total order booking including data center export is around Rs.120 crores (Page 17). - Data center customers typically provide rolling one-month firm orders domestically; hence, the company does not break down the order book specifically for data center (Page 17). - Export order booking includes confirmed orders from Europe, North America, and UAE (Page 6, 17). - A recent UAE order worth approximately Rs.120 crores was disclosed, but dispatch was delayed, leading to inventory buildup (Page 16, 10). - Exports target to nearly double this year compared to last, with a strong focus on data center orders (Page 13, 17). - Order booking and demand for data center products are strong, with long lead times of up to 6-7 months for some customers (Page 16, 6). - Approval processes for new customers like Vertiv are nearing completion, with supply expected to start soon, which will add to order inflow (Page 17).