KRN Heat Exchanger: Can expansion in data centre drive its profits and order book growth?

Synopsis: KRN Heat Exchanger and Refrigeration Ltd posted Q3 FY26 net profit of Rs 23 crore, up 65 percent YoY, driven by strong data center, export, and bus AC demand, supported by backward integration.

The article outlines KRN Heat Exchanger and Refrigeration Ltd’s strong operational and financial performance, highlighting robust Q3 FY26 growth, expansion in data center, export, and bus air conditioning segments, strategic backward integration, and capacity ramp-up driving revenue, margins, and future growth potential.

KRN Heat Exchanger and Refrigeration Limited (incorporated 2017) is a Rajasthan-based manufacturer specializing in aluminium and copper fin-and-tube heat exchangers, condensers, and evaporators for the HVAC & Refrigeration industry. Serving major OEMs, they provide customized cooling solutions for residential, industrial, and automotive applications, with a strong focus on expansion

The company specializes in heat exchangers, HVAC, and refrigeration solutions, catering to both domestic and international markets, including the UAE, USA, Europe, and Canada. Its products serve diverse end-use segments such as data centres, commercial cooling, transport refrigeration, and industrial cooling, positioning it as a key player in thermal management solutions.

With a market capitalization of  Rs 5,691 crore, KRN Heat Exchanger and Refrigeration Ltd’s shares closed at Rs 915.60 per share, up by 2.21 percent from its previous day’s close price. The share of this company has given a return of 101 percent since its listing.

Capacity Expansion & New Facility

Current: The company demonstrates strong operational efficiency across its manufacturing segments. Evaporator and condenser coils operate at 84.09 percent capacity, headers and copper parts at 84.53 percent, and sheet metal parts at 85.77 percent, reflecting effective utilization of installed capacities and consistent production performance across key components.

The company inaugurated a new plant on 11 March 2026, now in the ramp-up phase, already adding over 40 new customers. Utilisation from the facility is targeted at approximately 20 percent in FY26, with plans to reach around 50 percent by FY27, supporting growth and expanded market reach.

Growth Drivers

Data Centre Opportunity: As of Q3, the company generated approximately 15 percent of its top line from the data center segment, reflecting strong traction in this high-growth market. Recent months have seen significant orders, including some large-scale projects, with an active inquiry pipeline indicating continued momentum in the coming years.

Over the past year, the data center segment grew from 7 percent to 15 percent of the Indian market. While exact future percentages are not confirmed, management expects continued growth in this segment over the next 2 to 3 years, alongside parallel expansion in other areas like heat exchangers, refrigeration, and air‑conditioning components.

Bus Air Conditioning (New Segment)

The bus air conditioning market in India is estimated at over Rs 1,000 crore and growing 20 percent to 25 percent annually. The company expects to capture at least 15 percent of this market next year, serving OEMs, body builders, and aftermarket clients.

This segment is projected to deliver margins above 20 percent, higher than the company’s core business, reflecting strong profitability potential. Strategic engagement with key OEMs and diversified clientele positions the company to leverage growth in India’s expanding bus air conditioning market.

Export Growth

During the quarter and the nine-month period, the company saw robust demand both in India and in key export markets, including the UAE, the United States, Canada, and Europe. Strong orders and sustained market interest underscore the company’s growing international presence and revenue contribution from exports.

On pricing competitiveness, the company can offer products at 15 percent to 20 percent lower landed cost compared to European and U.S. suppliers. While not competing on mass production with China or Vietnam, this cost advantage positions the company as a preferred supplier in premium markets, enhancing export growth and profitability.

Backwards Integration Advantage

The company demonstrates strong backward integration, with in-house capabilities across heat exchangers, tubing, FRP, and sheet metal. This vertical integration enhances cost control, improves gross margins, and ensures efficient execution, setting the company apart from other Indian manufacturers that rely more heavily on external suppliers.

While certain components like fans, blowers, and controls are sourced from reputed vendors, the company’s end-to-end manufacturing for key components allows it to maintain competitive pricing and superior quality. This strategy supports margin expansion and positions the business well for scaling in both domestic and export markets. 

Business Model Insight

The company operates on a rolling order book model rather than project-based orders, with key customers providing approximately six months of forecast and one month of firm orders. Strong demand from the data center segment is driving substantial single purchase orders, contributing significantly to revenue visibility and growth momentum.

Financial Highlight: In Q3 FY26, the company reported consolidated total income of approximately Rs 155 crore, marking a 33 percent year-on-year growth. EBITDA nearly doubled to around Rs 31 crore, while net profit rose 65 percent to nearly Rs 23 crore, reflecting strong execution and operational efficiency.

Looking ahead, the company remains confident in its growth trajectory. With a positive industry outlook, a stable order pipeline, and continued strong customer engagement in both domestic and export markets, the business is well-positioned to sustain momentum and scale further in the coming quarters.

Conclusion

KRN Heat Exchanger and Refrigeration Ltd has demonstrated strong execution, posting a 65 percent growth in net profit in Q3 FY26. Growth is driven by robust demand from data centers, exports, and the emerging bus air conditioning segment, supported by operational efficiency and backward integration.

Looking ahead, the company is well-positioned to capitalize on high-growth opportunities in domestic and international markets. Expansion of manufacturing capacity, a rolling order book, and strategic focus on data centers and bus AC provide a strong foundation for sustained revenue, margin expansion, and long-term value creation.

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