Another positive development for retail investors and the company’s valuation is the bonus issue

It appears that the management has recognized the importance of increasing market capitalization.

While the exact reason for this move is unclear, it could be due to several factors:

1. Attracting larger customers
2. Seeking private funding
3. Promoter dilution, etc.

The best investment returns could come from price re-rating combined with business growth (a Value plus Growth Strategy).

The first phase—price re-rating—seems to have already occurred in Kitex. Next, if the company can deliver sustained business growth, the stock has the potential to multiply.

Disclaimer: Invested in the range of ₹150 to ₹200. These are my personal views, and my investment perspective is, of course, very long-term oriented.

cfdc3c26-b494-491b-a026-a5083ee85f00.pdf (275.1 KB)

Here’s a detailed note from concall

Company Overview:

• Founded: 2017
• Specialty: Manufacturing aluminum and copper heat exchangers, condenser and evaporator coils, primarily for HVAC&R applications.
• Production Capacity: 1 million units annually, with a facility spanning over 100,000 sq. ft.
• Listing Date: Recently listed on NSE and BSE (Oct 2024).
• Revenue Sources: 81% from domestic sales, 19% from exports (Q2 FY25).

Q2 FY25 Financial Highlights:

• Standalone Revenue: Surpassed INR 100 crore (39.41% YoY increase).
• Consolidated Revenue: INR 92.53 crore (28.41% YoY increase).
• EBITDA: Consolidated EBITDA grew 36.38% YoY to INR 19.59 crore, with a 21.70% margin.
• Net Profit: Increased 42.98% YoY to INR 12.37 crore, with a 13.35% net profit margin.

Future Revenue Growth Projections:

1. Expansion Plan with New Subsidiary (KRN HVAC Products):

   • Capacity Expansion: Sixfold increase, aiming to cater to rising domestic and export demands.
   • Funding: Primarily through proceeds from IPO, internal accruals, and potential bank financing.
   • Timeline: Sample production expected to start in April 2025, with full-scale commercial production by Q2 FY26.

2. Revenue Contribution from New Capacity:

   • Targeting significant contributions by FY26 as the capacity expands and reaches ~85-90% utilization within three years post-expansion.
   • Revenue Projections: With full utilization, peak potential from this new capacity could exceed INR 2000 crore.

3. Key Drivers of Future Growth:

   • Product Diversification: Launch of bar and plate heat exchangers, roll bond heat exchangers, and expansion into new applications (e.g., oil cooling in heavy machinery, electric locomotives).
   • Market Demand: Expanding demand from sectors like data centers (contributed 7% to revenue in FY24), with Schneider Electric as a major client.
   • Export Market Penetration: Targeting Europe and North America, leveraging anti-dumping tariffs on Chinese imports in the U.S. and demand for high-quality, reliable heat exchangers. Plans to add more clients in Europe and North America, bolstered by successful exhibits in these regions.

4. Strategic MoU with Rajasthan Government:

   • Objective: INR 1000 crore investment plan under the “Rising Rajasthan” initiative.
   • Funding Strategy: Combines IPO proceeds with internal accruals and, if necessary, additional financing.
   • Timeline: Investment spread over five years, expected to generate substantial revenue as new capacities become operational.

5. Customer Base and Sales Strategy:

   • Major Clients: Top clients include Daikin, which contributes 33% to revenues, and Schneider Electric, covering around 90-95% of KRN’s data center business.
   • Revenue Diversification: Plans to add new clients in both domestic and export markets, with over 200 potential customers in the pipeline.

6. Profitability and Margin Growth:

   • Efficiency Gains: New facilities will have a solar-powered 8 MW unit and benefits from Rajasthan’s RIPS 24 policy incentives, potentially enhancing EBITDA margins.
   • Export Revenue Impact: Export margins are generally higher than domestic, with the potential to further lift overall profitability as export share rises.

Investment Summary:

KRN is well-positioned for substantial growth due to strategic expansions, product diversification, and strong export potential. The company’s substantial capacity additions, key partnerships, and growing client base in the HVAC&R sector indicate strong future revenue prospects with stable profitability margins.

Thanks! can you please help me understand what would that statement mean in the press release “ We expect a 65-67% CAGR from FY24-26 levels….”