KRN Heat Exchanger Q3 Net Profit Soars 65% to ₹22.66 Crore

Introduction

KRN Heat Exchanger and Refrigeration Limited (BSE: 544263 | NSE: KRN) has announced strong unaudited financial results for the third quarter and nine months ended December 31, 2025. The manufacturer of heat exchangers and refrigeration components reported a significant 65% year-on-year increase in its consolidated profit after tax (PAT), supported by robust revenue growth and enhanced operational efficiency. This performance highlights the company's ability to capitalize on healthy demand from both domestic and international markets.

Consolidated Financial Performance in Q3

The company's consolidated total income for Q3 FY26 grew by 33.29% to ₹155.09 crore from ₹116.36 crore in the corresponding quarter of the previous fiscal year. This top-line growth was accompanied by a substantial improvement in profitability. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) nearly doubled, surging 96.54% to ₹31.08 crore. Consequently, the EBITDA margin saw a significant expansion of 610 basis points, rising to 20.28%. The consolidated net profit jumped 65.09% to ₹22.66 crore, with the net profit margin improving by 281 basis points to 14.61%. The diluted Earnings Per Share (EPS) for the quarter stood at ₹3.65, a 72.17% increase year-on-year.

Nine-Month Performance Overview

For the nine-month period of FY26, KRN Heat Exchanger maintained its growth trajectory. Consolidated total income increased by 40.06% to ₹428.41 crore. EBITDA for the period grew by 52.91% to ₹78.93 crore, while net profit rose by 39.72% to ₹53.11 crore. The diluted EPS for the nine months was ₹8.54, marking a 16.03% growth compared to the same period last year.

Standalone Results: A Mixed Picture

While the consolidated figures were strong, the standalone performance presented a more nuanced view. Standalone total income for Q3 FY26 increased by 31.35% to ₹140.67 crore. However, net profit growth was more modest at 18.93%, reaching ₹15.09 crore. A point of concern was the contraction in margins at the standalone level. The standalone EBITDA margin declined by 276 basis points to 12.77%, and the net profit margin fell by 112 basis points to 10.73%. This trend of margin pressure was also visible in the nine-month standalone results, where the EBITDA margin contracted by 281 basis points.

Export Strength and Market Diversification

Exports remain a critical driver of KRN's business. For the first nine months of FY26, the company's revenue was well-diversified geographically. The United Arab Emirates and the USA were the largest contributors, accounting for 38.10% and 37.28% of export revenues, respectively. Other key markets included Canada (8.57%) and Italy (7.60%), demonstrating a strong international footprint and reducing dependency on any single market.

Management Commentary and Outlook

Mr. Santosh Kumar, Chairman & Managing Director, expressed confidence in the company's performance. He stated, "During the quarter and across the nine-month period, we have seen steady progress in our core business, driven by consistent execution and improving order visibility." He highlighted that healthy demand from both domestic and export customers has been met with timely deliveries and high-quality standards. Looking forward, Kumar is optimistic about sustaining the growth momentum, supported by a stable order pipeline, expanding export engagements, and a continued focus on operational efficiency.

Capital Efficiency and Strategic Moves

An analysis of the company's balance sheet reveals a period of aggressive expansion. Total assets grew from ₹257.42 crore in FY24 to ₹595.11 crore in FY25. This expansion was funded through a significant capital raise, which also helped improve the debt-to-equity ratio to 0.07 from 0.46. However, this rapid growth has impacted capital efficiency metrics. The Return on Equity (ROE) declined to 10.60% in FY25 from 30.23% in FY24, and the Return on Capital Employed (ROCE) fell to 12.38% from 26.39%. These figures suggest that while the company is growing and reducing debt, the returns on its capital base have diminished. Strategically, the company has strengthened its portfolio by acquiring the bus air-conditioning division of Sphere Refrigeration Systems and has started commercial production at its Neemrana subsidiary.

Market Reaction and Conclusion

Following the results, the shares of KRN Heat Exchanger and Refrigeration Limited were trading at ₹672.25 on the BSE, a slight decrease of 0.25% from the previous close. The stock saw an intraday high of ₹678.00 and a low of ₹656.00. The company's strong consolidated performance demonstrates its robust market position. However, investors will be closely watching the standalone margin performance and the declining capital efficiency ratios to see if recent investments can translate into improved profitability and shareholder returns in the coming quarters.