# 1. Financial Performance ## A. Key Figures * **Consolidated Total Income:** **₹118.86 Cr** (Q1 FY26) · **EBITDA:** **₹17.59 Cr** (15.26% margin) · **Net Profit:** **₹12.42 Cr** (10.45% margin) · **EPS:** **₹2** * Stand-alone Total Income: ₹117.14 Cr (+18.65% YoY) · EBITDA: ₹19.79 Cr (17.30% margin) · Net Profit: ₹15.69 Cr (+34.85% YoY, 13.39% margin) · EPS: ₹2.52 * Revenue Growth: 20.36% YoY overall · Domestic: ₹96.39 Cr (+17.27% YoY) · Exports: ₹18.89 Cr (+39.04% YoY) ## B. Profit Margins * **Margin Pressure from New Plant:** EBITDA decline attributed to start-up costs, including **~₹4 Cr** in one-time expenses from depreciation, interest, and trial runs. * **Stable Margin Outlook:** Management expects current product margins to hold despite export growth, with no significant near-term change anticipated. ## C. Balance Sheet * **Favorable Tax Structure Ahead:** New subsidiary benefits from **15% concessional tax rate**, expected to gradually lower consolidated rate from current **28–30%**. * **Minimal Leverage:** Company operates with **near-zero debt**, supported by fixed deposits; term loan outstanding is only **₹2 Cr**. * **Balance Sheet Pending Finalization:** Capitalization of new plant assets not yet reflected due to post-quarter deliveries; updated figures to follow. --- # 2. Export & Geography Mix ## A. Key Figures * Export Sales: ₹18.89 Cr (16.4% of consolidated sales) * **Export Mix:** **18%** of total sales in FY '25 ## B. Export Revenue * **Global Expansion Accelerating:** Broadening footprint in Germany, Canada, France, UAE, and Italy driving export growth and international market traction. * **Strategic Export Ambition:** Management targets exports to reach **50% of total sales** within three years, supported by **300–400 bps higher gross margins** versus domestic. --- # 3. Capacity & Production ## A. Key Figures * **New Facility Size:** **600,000 sq. ft.** (strategic export expansion) * **Capacity Utilization Outlook:** **20–25%** in FY '26 · **~50%** in FY '27 · **~80%** in FY '28 * **Revenue Implication (Supportive):** **INR 450 Cr** estimated from new facility at 25% utilization ## B. New Facility Ramp-up * **Commercial Launch Achieved:** Successful commencement of operations at **KRN HVAC’s Neemrana facility** on **May 31, 2025**, marking a key strategic milestone. * **Initial Output Underway:** Production has begun on a small scale with trial runs and sampling; some units already billed via HVAC channel. * **Export-Centric Design:** New plant specifically engineered to overcome space constraints and meet international standards, enabling **significant export capacity expansion**. * **In-House Manufacturing Strength:** Full captive capabilities for sheet metal, laser cutting, and Type Fin Pres support end-to-end component production. ## C. Utilization Timeline * **Ramp-Up Phased into H2:** Full production ramp-up expected to begin in **Q3**, following completion of training, system stabilization, and customer audits. * **Near-Term Constraints:** Current quarter output limited by ongoing **manpower training and system readiness**, with **lab equipment installation** taking ~2 months post-arrival. * **H2 Volume Build:** Strong production volumes anticipated in **Q3 and Q4**, with new facility operating at **25% capacity through Q4**. ## D. Customer Approvals * **Approvals Pending, Progress Steady:** **One to two customer visits per week** ongoing; target is to secure all **QMS and quality approvals by quarter-end** to unlock full dispatch. --- # 4. Product & Segment Performance ## A. Key Figures * **Market Size:** **>₹4,000 Cr** total heat exchanger market (all segments) * **Google Data Center Capex:** **₹50,000 Cr** planned investment in India * **HVAC Share of Data Center Spend:** **~₹1,000 Cr** estimated opportunity for HVAC/heat exchangers (10% of total) * **Product & Customer Growth:** **5+ new products/day** added for existing customers · **~2 new customers/month** onboarded * **Market Share Target:** **60–70%** potential share in district cooling projects ## B. HVAC Segment Strategy & Positioning * **Pure B2B OEM Model:** Exclusively serves OEMs with no aftermarket exposure due to **very thin margins**; strategic shift from initial aftermarket focus. * **Selective Order Policy:** Prioritizes long-term, high-volume relationships based on customer profile and continuity; avoids small or one-off orders. * **Broad System Integration:** Company’s coils are used across **central AC systems** in high-end residential and commercial projects, supporting share gains in premium segments. * **Full Product Range:** Achieved backward integration with **complete heat exchanger portfolio**, including **21 geometries**—a unique offering in India. ## C. Innovation & Product Expansion * **AHRI-Certified R&D Hub:** **Thermotech Research Laboratory** established as a standalone entity and recognized as **India’s first AHRI-approved lab**, enhancing credibility and technical capability. * **Innovation Pipeline:** Lab enables development of **high-efficiency features** (e.g., specialized tube geometries); **patents expected** on product-level innovations to build competitive moat. * **Customer-Led Upselling:** Leverages lab capabilities to analyze customer products and co-develop **energy-efficient upgrades**, especially for clients lacking in-house R&D. * **Expansion into Adjacent Markets:** Targeting growth in **heat pumps, gas heating, and refrigeration**, with cross-selling driving daily product additions. ## D. Data Center & District Cooling Opportunity * **Major Data Center Tailwinds:** Growth fueled by large-scale investments like Google’s ₹50,000 Cr plan, with HVAC systems representing a **significant indirect opportunity**. * **District Cooling Advantage:** Emerging urban infrastructure trend supports demand for centralized systems, where company’s **commercial heat exchangers, chillers, and condensers** remain essential. * **Dominant Positioning in New Infrastructure:** Despite minimal room AC presence, company is poised to capture **majority share in district cooling projects** due to product fit and scale. * **End-to-End Assembly Goals:** Manifold and tubing capabilities are mature; focus now shifts to delivering **complete commercial assembly solutions**. --- # 5. Risks & Operational Delays ## A. Facility Approval Delays * **Headline:** Facility operations commenced by end-May 2025 after a delay of over two months, marking a resolution to initial timeline slippage. * **Headline:** RIPS scheme approval pending **CTO pollution certification**, expected within the next week; application to follow immediately upon receipt. * **Headline:** Commercial billing remains on hold pending **OEM customer approvals**, which require both QMS audits and physical facility visits—not just product validation. * **Headline:** Limited US customer adoption currently; **only one or two customers** are actively using the product with no adverse feedback reported. --- # 6. Guidance & Outlook ## A. Key Figures * **Growth Timeline:** Revenue ramp-up from new plant anticipated in **Q3 or Q4 2025** post-approvals ## B. FY26 Revenue Trajectory * **Improving Momentum:** Management expects significant sequential revenue improvement in H2 FY26, with targeted achievements by year-end driven by new facility progress and strong order pipeline. * **Export-Led Expansion:** Multi-year sales growth to be fueled by exports, PLI scheme, RIPS, solar initiatives, and new product launches. * **Resilient Demand:** No major US demand disruption expected post-tariff implementation, supported by positive customer feedback. * **Facility Progress:** Regular customer visits to new plant signal advancing commercial readiness despite absence of firm orders to date. ## C. Margin Recovery Plan * **Segment Shift:** Future growth and margin recovery to be driven exclusively by the HVAC segment, as Heat segment runs at full capacity with stable output. * **Tax Benefit Tailwind:** Increasing share of lower-taxed HVAC revenue to gradually reduce overall tax burden and support margin expansion. ## D. Long-term Growth Drivers * **Policy Catalysts:** RIPS approval expected imminently, with financial incentives set to boost P&L from Q3 onward; PLI scheme remains key growth lever. * **Focused Strategy:** No active hydrogen, steel, or renewable energy projects in pipeline; current growth focus remains on core HVAC and policy-supported segments. * **Confident Outlook:** Management reaffirms commitment to delivering on updated targets, with expectations of strong performance recovery in H2 and robust momentum in FY27.