KRN Heat Exchanger Gets Dolat Capital's 'Buy' Initiation On Inexpensive Valuation, Supernormal Growth Outlook

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Dolat Capital Report

We initiate coverage on KRN Heat Exchanger and Refrigeration Ltd. with a ‘Buy’ rating and a DCF-based target price of Rs 1,111. KRN is a leading manufacturer in the HVAC&R industry, specializing in the design and production of fin and tube-type heat exchangers.

The company achieved an impressive 71% EPS CAGR over FY20-FY25, driven by consistent double-digit growth in evaporators and condenser coil sales, a doubling of high-value export revenue share to 16% in FY25, and Ebitda margin expansion of over 10%.

KRN is well positioned to benefit from -

1. six times capacity expansion plans,

2. rising demand for Commercial AC and Data Centre;

3. PLI and RIPS schemes boosting Ebitda margins by 290 bps; and

4. concessional tax rate of 17% on new capacity.

We expect EPS CAGR of 72% over the next three years. The stock is currently trading at 72x/36x of FY26E/FY27E EPS.

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