At a Glance
KRN Heat Exchanger & Refrigeration Ltd (KHERL) – the new kid on the BSE SmallCap block – just dropped its Q1 FY26 results: Revenue ₹115 crore (+20% YoY), PAT ₹12.4 crore (+3.7% YoY), EPS ₹2.0. While the company builds fin-and-tube heat exchangers that keep everything from HVACs to refrigerators cool, its stock is running hotter than a CPU without thermal paste. At a P/E of 99, this stock is priced for perfection. ROCE is solid at 20.7%, but investors should keep a fire extinguisher handy.
Introduction
What happens when a niche industrial manufacturer suddenly becomes the market’s darling? You get KRN Heat Exchanger – a company with ₹5,291 crore market cap, riding on the back of growth, energy efficiency trends, and the global HVAC boom. Founded to make boring-but-essential heat exchangers, KRN is now a poster child for industrial small-caps with multibagger dreams.
The catch? Profits aren’t keeping up with the hype. Revenues are growing at 40%+, profits at 32%, but valuations have gone to another planet.
Business Model (WTF Do They Even Do?)
KRN designs and manufactures fin & tube-type heat exchangers – components critical in HVAC, refrigeration, and industrial cooling systems. Customers include OEMs across automotive, building climate control, and industrial segments.
They’ve carved a niche with high-efficiency designs and have minimal competition in India. Demand is driven by urbanization, cold chain expansion, and energy regulations pushing for efficient cooling tech.
However, this is still a B2B industrial business – cyclical and sensitive to raw material prices (copper, aluminum).
Financials Overview
Q1 FY26:
- Revenue: ₹115.3 crore (+20% YoY)
- EBITDA: ₹18 crore
- PAT: ₹12.4 crore (+3.8% YoY)
- EPS: ₹2.0
FY25:
- Revenue: ₹430 crore (+40% YoY)
- PAT: ₹53 crore (+36% YoY)
- EBITDA Margin: 16%
- Net Margin: 11.7%
Commentary: Revenue is climbing, margins holding, but PAT growth slowed this quarter. Maybe raw material costs bit into profits.
Valuation
Here comes the spicy part:
- P/E Method
EPS ₹8.58 × fair P/E (40 for industrial growth) = ₹343/share - EV/EBITDA
EBITDA ₹70 crore × multiple 12 = ₹840 crore → per share ~₹135 - Book Value
BV ₹80 × fair P/B 4 = ₹320
🎯 Fair Value Range: ₹130 – ₹340 (current ₹850 is 🚀 into orbit).
What’s Cooking – News, Triggers, Drama
- Q1 growth slows but still positive.
- Promoter holding strong at 70.8%, a good sign.
- Investor meet on Aug 1, 2025, may reveal expansion plans.
- Capex visible: CWIP jumped to ₹82 crore – likely capacity addition.
- No dividend yet – all cash goes to expansion.
Balance Sheet
| Assets | ₹595 Cr |
|---|---|
| Liabilities | ₹96 Cr |
| Net Worth | ₹436 Cr |
| Borrowings | ₹33 Cr |
Auditor Roast: “Debt-free? Almost. Assets doubled in a year – aggressive expansion. Let’s hope it pays off.”
Cash Flow – Sab Number Game Hai
| Year | Ops | Investing | Financing |
|---|---|---|---|
| FY24 | ₹3 Cr | -₹66 Cr | ₹66 Cr |
| FY25 | ₹21 Cr | -₹279 Cr | ₹258 Cr |
Commentary: Cash flow from ops improving, but heavy capex burns cash. Financing inflows (likely equity raise) saved the day.
Ratios – Sexy or Stressy?
| Ratio | Value |
|---|---|
| ROE | 16.8% |
| ROCE | 20.7% |
| P/E | 99 |
| PAT Margin | 11.7% |
| D/E | 0.08 |
Roast: “Returns are decent, but P/E is behaving like it’s the next Tesla of cooling.”
P&L Breakdown – Show Me the Money
| Year | Revenue | EBITDA | PAT |
|---|---|---|---|
| FY24 | ₹307 Cr | ₹59 Cr | ₹39 Cr |
| FY25 | ₹430 Cr | ₹70 Cr | ₹53 Cr |
| TTM | ₹449 Cr | ₹70 Cr | ₹53 Cr |
Commentary: Solid growth but PAT flat in recent quarters.
Peer Comparison
| Company | Rev (₹Cr) | PAT (₹Cr) | P/E |
|---|---|---|---|
| Inox India | 1,306 | 221 | 48 |
| Subros | 3,368 | 151 | 37 |
| Esab India | 1,373 | 175 | 47 |
| HBL Engg | 1,967 | 277 | 59 |
| KRN Heat Exchanger | 449 | 53 | 99 |
Commentary: KRN trades at 2x peer P/E. Either it’s future-proof, or investors are drunk.
Miscellaneous – Shareholding, Promoters
- Promoters: 70.8% (rock solid)
- FIIs: 2.3% (small but present)
- DIIs: 6.1%
- Public: 20.8%
High promoter stake signals confidence, but low institutional holding hints caution.
EduInvesting Verdict™
KRN Heat Exchanger is a classic growth story – niche product, global demand tailwinds, strong ROCE, and a debt-light balance sheet. However, at P/E 99, the market expects hypergrowth. Any miss, and this stock could cool faster than the products it sells.
SWOT Quickie
- Strengths: Niche leader, high margins, strong promoter backing.
- Weaknesses: Extreme valuation, small scale.
- Opportunities: HVAC boom, cold chain growth, export potential.
- Threats: Raw material spikes, cyclicality, valuation risk.
Final Word: Fantastic business, scary valuation. Great for believers, risky for traders. Watch Q2 results closely.
Written by EduInvesting Team | 31 July 2025SEO Tags: KRN Heat Exchanger, Industrial Products, Financial Analysis
