KRN HEAT EXCHANGER & REFRIGERATION Q2 CONCALL: EYES ₹1,250 CR+ FY27 REVENUE, RAISES EXPORT TARGET TO ₹250 CR; TARGETS 80% NEEMRANA CAPACITY UTILIZATION IN FY28, 60–80% EXPORT GROWTH & ₹20 CR RAILWAY HVAC REVENUE IN FY28

• FY27 Revenue Guidance: Management remains confident of achieving its earlier approximately ₹1,200 Cr revenue target and indicated that revenue around ₹1,250 Cr or higher is possible, subject to geopolitical conditions and export demand. • FY27 Revenue Outlook: Management expects full-year revenue to be in line with or slightly above earlier expectations, supported by data center demand, export growth and the Neemrana facility ramp-up. • FY27 EBITDA Margin Outlook: Management indicated that full-year EBITDA margins could be around 17–18%, although elevated freight costs and product mix create uncertainty. • Q3 FY27 Margin Outlook: Management expects EBITDA margins to remain broadly similar to Q2 because of continued freight cost pressure and seasonal disruptions around Diwali. • Q4 FY27 Margin Outlook: Management expects a recovery in EBITDA margins, potentially by approximately 100–200 bps over Q3, supported by operating leverage and higher export contribution. • Medium-Term EBITDA Margin Outlook: Management acknowledged the potential for approximately 18–20% EBITDA margins over the medium to long term, supported by higher exports, data center products and improved capacity utilization. • Medium-Term Revenue Growth Outlook: Management expects strong growth in FY28 and indicated that approximately 30% annual growth could be achievable thereafter, supported by an expanding product portfolio. • FY27 Export Revenue Guidance: Management increased its export revenue expectation to approximately ₹250 Cr from its earlier ₹200 Cr target. • FY28 Export Growth Outlook: Management expects approximately 60–80% growth in export revenue during FY28, supported by additional customers and increasing orders from North America and Europe. • FY28 Export Mix Target: Management aims for exports to contribute approximately 50% of revenue from the fin-and-tube heat exchanger product category by FY28. • Export Mix Clarification: Management clarified that the 50% target applies only to the fin-and-tube heat exchanger business, not consolidated company revenue. • FY27 Capacity Utilization Guidance: Management expects approximately 50% utilization at the new Neemrana manufacturing facility during FY27. • FY28 Capacity Utilization Guidance: Management targets approximately 80% utilization at the new facility during FY28. • Capacity Utilization Outlook: Management considers approximately 80% utilization to be near an optimal operating level for its manufacturing setup. • Neemrana Facility Ramp-Up: Management indicated that customer approvals, product qualification and manufacturing activity have improved progressively since commissioning. • Neemrana Growth Potential: Management expects the existing facility to support further revenue growth as customer orders and utilization increase. • Neemrana Revenue Potential: An analyst referenced approximately ₹1,800 Cr of potential annual revenue at full utilization. Management did not provide a firm figure, noting that revenue depends on metal prices and product mix. • South India Manufacturing Expansion: Management plans to establish an additional manufacturing facility in Bengaluru to support customers in southern India. • Bengaluru Facility Strategy: Management expects the planned Bengaluru facility to provide additional manufacturing capacity as utilization at Neemrana increases. • Bengaluru Expansion Timeline: Management indicated that the new South India facility is planned alongside the FY28 capacity ramp-up, without providing a precise commissioning date. • Data Center Growth Outlook: Management remains confident about demand for data center cooling products and indicated that it has not observed a slowdown in current customer orders. • Data Center Revenue – Q2 FY27: Revenue from data center-related products increased to approximately ₹116 Cr from ₹18 Cr in Q2 FY26. • Data Center Revenue – H1 FY27: Revenue increased to approximately ₹180 Cr from ₹38 Cr in H1 FY26. • Data Center Revenue Contribution: Data center products represented approximately 36% of Q2 FY27 consolidated revenue, based on management-reported figures. • Data Center Export Orders: Management indicated visibility of more than ₹50 Cr of export-side data center orders for the current financial year, although these are largely rolling customer requirements. • Domestic Data Center Customers: Management indicated that the company is supplying to major domestic data center cooling customers, with varying shares of individual customer requirements. • Data Center Order Visibility: Most customers provide rolling orders covering approximately one to two months, while certain firm projects may offer three to four months of visibility. • Data Center Order Book Disclosure: Management does not disclose a conventional long-term order book because most business comes through recurring OEM purchase orders. • Data Center Growth Drivers: Management expects demand from AI infrastructure, high-density computing, cloud facilities and conventional data center expansion. • Data Center Cooling Products: Company supplies heat exchangers used in air cooling, chillers, dry coolers and other cooling systems. • Data Center Product Expansion: Management is expanding its offering into dry air coolers, open-top condensers and additional cooling components. • Liquid Cooling Development: Company is developing brazed plate heat exchangers for liquid-cooled data center applications. • Liquid Cooling Technology: Management indicated that its existing vacuum-brazing capabilities provide a foundation for developing these products. • Liquid Cooling Commercialization: Management expects further product development over approximately 18 months and does not anticipate meaningful commercial production from the new liquid-cooling product during FY28. • Liquid Cooling Market Outlook: Management believes higher-density computing will increase liquid cooling adoption while conventional room and facility air cooling will continue to be required. • Air Cooling Business Outlook: Management expects its existing heat exchanger products to remain relevant even as data centers adopt liquid cooling at the server or rack level. • Liquid Cooling Product Opportunity: Management sees brazed plate heat exchangers as an additional product category rather than a complete replacement of its existing cooling business. • New Data Center Product Qualification: Management indicated that development and customer approval for new products can take approximately six to eight months. • Export Customer Expansion: Company has added new customers across North America and Europe, including a large North American customer. • Export Market Position: The United States is the company's largest export market, followed by Canada, France, the United Kingdom and Italy. • Export Market Diversification: Company also serves customers in the UAE, Vietnam, Sri Lanka, Brazil and Nepal. • Export Revenue – H1 FY27: Export revenue increased approximately 192% YoY to ₹125.8 Cr. • Export Revenue Mix: Exports contributed approximately 22% of H1 revenue, compared with approximately 16% in H1 FY26. • US Export Contribution: The United States accounted for approximately 43.7% of H1 export revenue. • Top Five Export Markets: The five largest export markets together contributed approximately 85% of export sales. • Export Margin Advantage: Management indicated that export products can generate approximately 400–500 bps higher EBITDA margins than comparable domestic products before accounting for freight costs. • Export Margin Outlook: Management expects increasing exports to support consolidated profitability as freight costs normalize and higher-value customers contribute more revenue. • Export Risk Factors: Management highlighted uncertainty surrounding US tariffs, international shipping routes, geopolitical tensions and freight charges. • Raw Material Cost Pass-Through: Management indicated that movements in copper, aluminium and stainless-steel prices are generally passed through to customers through quarterly pricing adjustments. • Quarterly Pricing Mechanism: Management prefers quarterly price revisions because most customers are recurring OEM clients and frequent monthly changes would create operational complications. • Raw Material Pricing Power: Management indicated that customized and technically critical products can provide some additional pricing flexibility. • Q2 Margin Pressure: Management identified freight inflation, higher material costs, customer pricing arrangements and business promotion expenses as major factors affecting profitability. • Margin Pressure Estimate: Management indicated that these factors together had an approximately 300–400 bps effect on margins. • Freight Cost Pressure: Higher inward and outward freight expenses, particularly for exports, were a major reason for the increase in other operating expenses. • Freight Cost Outlook: Management expects freight expenses to remain elevated during Q3, limiting near-term margin recovery. • Daikin Contract Margin: Management indicated that certain Daikin contract arrangements involve fixed absolute profitability, so increased material-related billing can reduce reported percentage margins without a similar decline in absolute profit. • Daikin Revenue Contribution: Management indicated that Daikin remains an important customer, although its contribution to the overall revenue mix has reduced as newer businesses scale. • Product Mix Improvement: Management expects higher exports, bar-and-plate products and complete HVAC systems to improve profitability over time. • Bar-and-Plate Heat Exchanger Margins: Management indicated that the bar-and-plate category generally earns somewhat higher margins than fin-and-tube heat exchangers. • HVAC Assembly Margins: Management indicated that assembly products and complete HVAC systems can generate better margins than basic heat exchangers. • Refrigeration Component Margins: Management indicated that refrigeration components generally earn slightly lower margins than fin-and-tube heat exchangers. • Bar-and-Plate Export Strategy: Company is initially focusing on domestic customers and may subsequently pursue export opportunities after establishing a stronger operating track record. • Complete HVAC Systems: Company is expanding beyond heat exchanger components into complete HVAC solutions. • HVAC Product Expansion: Management highlighted cold storage systems, dry coolers and open-top condensers as additional growth opportunities. • In-House Manufacturing Advantage: Company manufactures key components including heat exchangers, tubing, sheet-metal structures and certain assembly parts internally. • OEM & Own-Design Business: Management indicated that the company is supplying products under its own designs while continuing to manufacture for established OEM customers. • Bus Air Conditioning Outlook: Management expects continued growth in bus HVAC systems, particularly for electric buses. • Indian Bus AC Market Size: Management estimated the domestic bus air conditioning market at approximately ₹1,000 Cr, including conventional and electric buses. • Bus AC Industry Growth: Management estimated market growth of approximately 25–30%, with electric buses providing an important source of demand. • Electric Bus Customer Approvals: Management expects additional OEM approvals over the next one to two months, subject to customer qualification. • Electric Bus Supplies: Company has already commenced supplies to an electric bus OEM and has added several bus bodybuilders as customers. • Bus AC Market Share Target: Management discussed its earlier aspiration of approximately 15% market share but indicated that the business was behind that target during H1. • Bus AC Revenue Outlook: Management expects H2 revenue contribution to improve as pending OEM approvals are received and customer deliveries increase. • Bus AC Market Share Timeline: Management did not firmly commit to achieving the earlier 15% target by FY27-end and indicated that greater clarity would be available during Q3. • Bus AC Localization: Management is working to develop domestic sources for compressors used in bus air conditioning systems. • Bus AC Manufacturing Advantage: Management highlighted in-house heat exchanger, tubing and FRP capabilities as factors supporting product development and cost efficiency. • Railway HVAC Opportunity: Company has developed prototypes for railway air conditioning systems and is progressing through the relevant approval process. • Railway Plant Approval: Management expects a railway team to inspect the plant for approval of cabin air conditioning systems. • Railway HVAC Revenue Guidance: Management expects approximately ₹20 Cr of revenue from railway HVAC systems during FY28, subject to approvals and order conversion. • Railway Product Rollout: Management plans to begin with locomotive cabin air conditioning, followed by LHB coaches and potentially Vande Bharat-related applications. • Railway Tender Participation: Company expects to participate in Indian Railways tenders once the required manufacturing approvals are received. • Railway Growth Strategy: Management considers railway HVAC a longer-term product development and customer qualification opportunity. • Copper Tube BIS Regulations: Management is preparing for tighter BIS-related requirements on imported copper tubes. • Copper Tube Inventory: Company has increased inventories of certain copper tubes to protect production continuity during the transition. • Domestic Copper Tube Sourcing: Management is developing domestic supply relationships and pursuing sample approvals. • Copper Tube Suppliers: Management identified MetTube and Hindalco as domestic suppliers being considered for relevant copper tube requirements. • 5 mm Copper Tube Availability: Management confirmed that domestically manufactured 5 mm tubes are available from MetTube. • Export Advance Licence: Company intends to use eligible advance licence provisions to procure imported materials for export-oriented manufacturing. • Copper Tube Cost Pass-Through: Management expects higher domestic procurement costs, where applicable, to be reflected in customer pricing revisions. • Supply Chain Outlook: Management does not currently expect major raw material shortages beyond certain copper tube and bus AC compressor requirements. • Working Capital Improvement: Management expects improvements in inventory management and cash flow toward FY27-end. • FY27 Operating Cash Flow Outlook: Management indicated that operating cash flow could improve as inventory and receivable management initiatives take effect, without making an unconditional positive cash flow commitment. • Inventory Optimization: Company has implemented tighter inventory monitoring and is using SAP-based systems to improve inventory controls. • Export Receivable Financing: Management is evaluating factoring arrangements to improve cash conversion from export customers. • Import Financing: Company is considering buyer's credit arrangements for imported materials to improve working capital efficiency. • Working Capital Recovery Timeline: Management expects the effects of ongoing improvements to become more visible in the FY27 year-end balance sheet. • Rajasthan Investment Promotion Scheme: Management indicated that the company is eligible for benefits under the Rajasthan Investment Promotion Scheme. • PLI Incentives: Management also indicated eligibility for applicable Production Linked Incentive benefits. • Government Incentive Recognition: Management expects PLI and RIPS benefits to be recognized after obtaining the required government certification, potentially during FY28. • Q2 Other Income: Management clarified that the quarterly increase in other income did not include recognition of PLI or RIPS incentives. • Thermotech Research Laboratory: Company's in-house testing laboratory has commenced testing heat exchanger products and complete cooling systems. • Thermotech Product Development: Management expects the laboratory to support faster product validation, design optimization and customer approvals. • Value Engineering Opportunity: Management intends to optimize product geometry and reduce copper consumption without compromising cooling capacity. • Customer Cost Savings: Management expects design improvements to reduce customer costs while allowing KRN to retain part of the resulting manufacturing savings. • Testing Accreditation: Management expects the laboratory's next accreditation milestone within approximately four to five weeks, followed by AHRI certification efforts. • Third-Party Testing Opportunity: Management expects to explore external testing services after receiving the required accreditations. • Thermotech Commercialization Timeline: External laboratory testing services could begin approximately two to three months after obtaining the relevant certifications. • New Customer Additions: Management indicated that new customers have been added across fin-and-tube, bar-and-plate, refrigeration components and complete HVAC systems. • Customer Revenue Disclosure: Management did not provide a product-wise revenue breakup or the contribution from customers added during FY26. • Q2 Consolidated Revenue: Revenue from operations increased 109.86% YoY to ₹319.14 Cr, compared with ₹152.07 Cr. • Q2 Consolidated EBITDA: EBITDA increased 61.10% YoY to ₹48.75 Cr. • Q2 Consolidated EBITDA Margin: Margin stood at 15.27%. • Q2 Consolidated Net Profit: PAT increased 100.38% YoY to ₹36.11 Cr. • Q2 Net Profit Margin: Margin stood at 11.32%. • H1 Consolidated Revenue: Revenue from operations increased 113.75% YoY to ₹571.45 Cr. • H1 Consolidated EBITDA: EBITDA increased 104.40% YoY to ₹97.81 Cr. • H1 EBITDA Margin: Margin stood at 17.12%. • H1 Consolidated Net Profit: PAT increased 126.68% YoY to ₹69.01 Cr. • H1 PAT Margin: Margin stood at 12.08%, improving approximately 69 bps YoY. • Key Challenges: Elevated export freight costs, copper tube procurement regulations, raw material price volatility, working capital requirements, customer approval delays, capacity ramp-up execution and geopolitical uncertainty affecting international orders remain important factors.

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