JNK India Limited (JNKINDIA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the JNK India Q2 and H1 FY '26 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Akshit Gangwal from IIFL Capital. Thank you, and over to you, sir.

Thank you, Shlok. Good afternoon, everyone. On behalf of IIFL Capital, I welcome everyone to JNK India's 2Q FY '26 Earnings Call. We have with us today Mr. Arvind Kamath, Chairperson and Whole-Time Director; Mr. Pravin Sathe, Chief Financial Officer; and Ms. Annie Varghese, Senior Manager, Investor Relations. Without further delay, I will now hand over the call to the management for their opening remarks, which will be followed by Q&A. Over to you, sir.

Good afternoon, everyone, and thank you for joining us today for JNK India's Q2 FY '26 Earnings Call. I am Arvind Kamath, Chairman and Whole-Time Director. We appreciate your continued interest and support as we progress through another strong quarter. I'm pleased to report that Q2 FY '26 has been a resilient quarter for JNK India with a total revenue of INR 1,842.1 million, reflecting a 71.6% year-on-year growth. Our operating profit and EBITDA for this quarter also reflect a stable performance with significant improvement in both. We are pleased with our ability to maintain our margins despite the challenges in the broader market. For H1 FY '26, we achieved INR 2,871.8 million in total revenue reflecting a 44.9% year-on-year increase for the first half year. During this quarter, we also secured an ultra mega order from JNK Global Company Limited for providing design, engineering, supply and construction for a cracking furnace package at a petrochemical project in India. This is the largest single order win for JNK India till date, contributing to the expansion of our order book to INR 18,499 million as of September 30, 2025. This order is particularly significant as it strengthens our position in the critical combustion equipment and the upcoming petrochemical sector, which continue to experience strong growth driven by both Indian demand and infrastructure expansion. The petchem project is expected to contribute to JNK India's long-term revenue stream while also enhancing our capabilities in executing complex high-value projects. With rising demand in these sectors, this order reinforces our market position and the trust in our engineering excellence, further strengthening our order book and providing strong revenue visibility for the future. In addition to securing key contracts, we also made important progress in expanding our business into the clean energy sector. During Q2 FY '26, we formed JNK Chemdist Technologies Private Limited, a joint venture with the founders of Chemdist Group. This company will focus on green hydrogen technology and sustainable chemical and fuel solutions. By combining JNK India's engineering expertise with Chemdist technology in green hydrogen and sustainable chemicals, this joint venture, a subsidiary of JNK India will significantly enhance our product portfolio, enabling us to offer cutting-edge sustainable solutions. The JV not only strengthens our position in the green energy space, but also gives us access to international expertise and a growing market of clean energy projects. The combination of our growing order book and the formation of our strategic joint venture provides us with a unique opportunity to capitalize on both traditional and emerging sectors. Our strong order book ensures a clear pipeline for revenue recognition, while the new venture opens new avenues in the renewable energy market, positioning us for a long-term success. With a strong pipeline of projects in the refinery, petrochemical, fertilizer and green energy sectors, we are confident in our ability to drive a sustained growth. The company will continue to focus on strengthening its market presence, expanding its capabilities and delivering value through innovation and operational excellence, ensuring long-term growth and success. With that, I would now like to hand over to our CFO, Mr. Pravin Sathe, to take you through the financial performance for Q2 and H1 FY '26. Thank you very much.

Thank you, Mr. Kamath. Good afternoon, everyone. I'm Pravin Sathe, CFO of JNK India Limited. I will now take you through the financial performance for the quarter 2 FY '26 and H1 FY '26. Starting with Q2 FY '26, we are pleased with the strong performance driven by the strong revenue growth and improved operational efficiency. Total revenue for the quarter was INR 1,842.1 million, reflecting a 71.6% year-on-year growth. This growth was primarily driven by the strong performance in our core sectors, particularly the heating equipment. The revenue from heating equipment remains the largest contributor, making up approximately 80.3% of our total revenue in Q2 FY '26, while the process plant and flares, incinerators and others contributed 11.8% and 8%, respectively. Our operating profit for the quarter 2 FY '26 was INR 454 million, representing a 34.6% year-on-year increase. with an operating margin of 24.6%. Our EBITDA for the quarter was INR 223.4 million, reflecting a 44.7% year-on-year increase. And the EBITDA margin was 12.1%, up from 7% in quarter 1 FY '26. Profit after tax for Q2 FY '26 was INR 130.2 million, reflecting a 68.1% increase year-on-year with a PAT margin of 7.1%. The strong performance in Q2 FY '26 was driven by significant revenue growth across key sectors such as heating solutions and petrochemical, supported by higher order inflows. Additionally, improved project execution helped drive higher profitability, while the strong order book provides continued revenue visibility for the future growth. For the first half year of FY '26, our total revenue was INR 2,871.8 million, showing a 44.9% year-on-year growth. Operating profit for H1 FY '26 was INR 696.3 million with an operating margin of 24.2%. EBITDA for the first half year of FY '26 was INR 295.1 million, reflecting a margin of 10.3%. Profit after tax for H1 FY '26 was INR 141.5 million, reflecting a margin of 4.9%. As of 30th September, the order book stands at INR 18,499 million, up from INR 13,116 million in H1 FY '25, reinforcing strong revenue visibility for the coming quarters. Our operating expenses increased by 88.5% year-on-year in Q2. Despite these increases, we were able to maintain our margins on account of strong revenue growth and project execution efficiency. I'm also happy to report that our cash conversion cycle has significantly improved to 76 days in H1 FY '26 from 232 days in H1 FY '25. We remain committed to executing on our order book efficiently while also leveraging the opportunities arising from the green hydrogen sector. Both efforts will drive sustained growth and ensure JNK India's continued evolution as a leader in engineering solutions pertaining to combustion equipment and sustainable energy. Thank you.

[Operator Instructions] The first question comes from the line of Kamlesh Bagmar from Lotus Asset Management.

Congrats on excellent performance. I have one question for Mr. Kamath. Sir, how do we see our order pipeline going forward? We have INR 1,800 crores or around INR 1,900 crores of orders in hand. So how do we see next 6 months, let's say, of this financial year in terms of order inflow?

Kamlesh, thanks. Basically, we still have some part of the petchem job, which JNK Global is executing. So that order inflow could also would be expected in next 6 months or so. And other than that, the -- in terms of the bid pipeline, exports mainly and also to some extent on domestic, both are quite strong, even on a near term of, say, about 6 months to a year. So we do have at least 3 to 4 firm projects which are going on in Africa and Middle East and also Russia. And even domestic petchem and now some projects are announced in fertilizer sector as well. So considering all this, so I think we are in terms of bid pipeline, we see a very good visibility going ahead as well.

Great, sir. And sir, if you can guide like in next 6 months or 9 months, whenever these projects come in or they firm up, like, what order book we see? Because as of now, we have INR 1,900 crores of order book, which is suffice to have, like say, for next 3 years of -- at current run rate, at least 3 years of order book, which we have. So what level of order book which we see, like say, it would be significantly higher from the current levels, like say, from INR 1,900 crores levels, where do we see ourselves or our company in terms of order book, which we see at the end of this fiscal year? If you can quantify that, that would be very helpful, sir.

Exactly quantifying becomes a bit challenging because these projects are quite on a -- it takes some time to finalize per se because even as you said, the current order book, which will be executed in this fiscal year, next fiscal year and also might a little bit spill over to the next fiscal year as well. So kind of exactly quantifying how much we will be at the end of this fiscal year would become a bit subjective though, but because the current order book itself is quite healthy for us with definitely a revenue visibility of next almost 2 years. I think so we are in a very good wicket as of now.

But in terms of bidding pipeline or whatever the pipeline orders are which are there -- so are we seeing a significant increase in the activity because we had heard that some delay is there in the -- in case of ordering for refineries. So are we seeing significant jump in the order -- ordering activity? How are we seeing over the last couple of months?

I mean it is steady. But yes, we are seeing some improvement in terms of the fertilizer market as well. In petchem market has seen -- already seeing a good growth even domestically as another 2 to 3 projects are already announced and have started working on. But now going ahead, we also have come across at least 2 to 3 firm fertilizer projects as well, which also has a very good opportunity for us.

And lastly, sir, on this INR 1,900 crores of order book, what margin now we are guiding, if you can elaborate on that?

The margins, we have always guided on the -- our normal margins the company has always tried and performed is in the region of EBITDA of around 13% to 16%. So we kind of have -- are confident of maintaining this margin.

The next question comes from the line of Jainam Doshi from Kriis Portfolios.

Congratulations on a good set of numbers. First would be like what portion of our total order book contains the legacy orders? And if it is a substantial portion of the number, then what is the execution time line for the same, which we are anticipating?

In terms of the very old order, Jainam, you mean to say the legacy means the old pending orders?

Yes, yes, old pending orders. Correct.

Yes, the old pending orders are very -- I mean, it's almost diminishing now because most of them we executed in last couple of quarters. And in terms of the, say, percentage, it could be around, say, 5%, 6% of the order book. That's it. And we would complete in next 1 or 2 quarters, those -- whatever the completion.

Okay. So then we'll have all the new orders, all the recent orders which we have received left for the execution, right? The legacy will be completed. The legacy orders will be completed, yes?

Yes, yes, that's correct. Yes. I mean, now also we are, I think, executing more than 50% of the -- which are the new orders only, yes.

Okay. Okay. Got it. Also, can you throw some light on the products or the solutions which we are looking for developing for the JV, which we have done with Chemdist? And what would be the addressable market size of such products?

Yes. I mean, currently, as far as JNK India is concerned, we received the -- last year was the first cracking furnace order which we received. And now we have received the one more order for the cracking furnace. So this is kind of giving us good references and good strength in terms of the cracking furnace orders, which are the most high end in terms of the heating equipment because we had not received the direct order for cracking furnace till last year. And other than the crackers, we have also gone into flares and incinerators, which you are aware of, which we have received the orders last year. And we are also bidding for some of the opportunities. And other than this, we are also bidding for some of the green hydrogen projects and also like a sustainable aviation fuel and technology-based EPC project like what we are executing for HPCL. And in terms of the joint venture, which is Chemdist -- JNK Chemdist, basically, they are into manufacturing of some of the critical equipment like evaporators, separators, reactors and also some of the specialized technologies like green hydrogen and sustainable chemicals and sustainable fuels. So it's a bit difficult to quantify the addressable market for Chemdist because it's quite diverse. And they're also more focused into chemical and pharma, which gives us a good diversification in terms of the sector. And in terms of the emerging technologies, how they will and which technology will catch up and to what extent is what we have to see. But definitely, next -- this year and maybe 1 or 2 years, we are expecting that this JV will add at least about something like 10% to 15% to our top line.

Okay. Good to know that. And lastly, are we looking at any other such collaborations for like diversification or entry into other products or something like that?

We are open to any of the inorganic growth opportunities as well. So we do keep evaluating in the similar space or adjacent technologies, which we can add value in terms of our existing strength and giving the, yes, kind of opportunities what we can have because even with Chemdist, we are kind of having a lot of opportunities in export market as well.

The next question is from the line of Mohit Kumar from ICICI Securities.

My first question is, sir, what was the overall order value to the JNK Global and out of which -- I'm trying to figure out what percentage of order has accrued to our order book.

Basically, JNK Global received the contract value of around INR 2,600 crores. And what we have received till date is about INR 1,050 crores.

Understood. Sir, I understand that, of course, the JNK Global was L1 in -- L1 at 2 places, right? 2 places. One was BPCL Bina and the other was IOCL expansion, right? So the other one, is it fair to assume that the other one is of similar size -- is it a fair assumption?

No, no. I mean, IOCL Paradip, the tender is yet to be floated. They have announced the project, and there is no -- the inquiry has not yet come.

This one is BPCL, right?

Yes, this is only BPCL, yes, correct. What JNK Global has received, yes.

Understood, sir. My second question is on the execution of this particular order. I understand that the deadline is the -- project has to be completed by 2028, somewhere around that, right? How do you -- what would be the -- how the execution will happen over the next 3 years? Will it be lower in the first year, a little higher in the second and third year? Is that the way one should look at?

I mean generally, this happens in a typical -- like our other projects. So initially, for the first year, it would be a bit on the lower side because there wouldn't be more dispatches, and it would be a bit heavy on the second year because there will be a lot of dispatches. And again, it will taper down on the third year, depending on the site completion and construction that way. But because we have now have gone for the input revenue recognition method, this gives us a bit more uniformity in terms of the revenues on a quarterly basis and also margins on a quarterly basis.

The next question comes from the line of [Sagar Mehta] from [Alpha Capital].

Sir, my first question is on the execution part in the second half of this year. So earlier, we were guiding for 40% growth in this year. But -- and we were also saying that Q2 would not be that good. So -- but Q2 has come quite good. So how are we expecting the second half because second half is generally better for yourself.

Sagar, basically, the overall whatever the overall annual guidance what we have given. So we are in line with that. And Q2, yes, I mean, in terms of the revenues, it has come out all right. But what we meant was the EBITDA margins, we still feel that it could -- we could go to our conventional back to whatever guidance we had given. So that's why we said it may not be that good. But yes, I think next -- going Q3 and Q4, we should be able to do better. That's what we meant, yes.

Got it, sir. And sir, on margin side, I wanted to understand in last -- excluding the FY '25 from FY '21 to '24, we were making like 19% -- 18% to 20% of EBITDA margins. So can we go back to those numbers or like something has changed in the industry, so we will not be able to reach those 18% to 20% margins?

Yes. I mean, basically, see, that time, we were following the output method. So there was a bit of a difference in terms of the margin recognition. And we were comparatively executing the smaller jobs. So -- and it was more product-oriented jobs and the execution was more in terms of just supply than supply and construction. Whereas that is why we kind of -- in our guidance throughout, we just generally guided a margin of around 13% to 16% because -- as we execute a larger project, so -- and also the more site construction, there are a lot of variables which cannot be completely controlled by us. And as the project size goes up, there are many in terms of the complexities and variables and also the time frame which goes on the project execution goes for about 2 years and 3 years. So this is the reason why we are kind of conservatively guiding a bit -- whereas our endeavor is to do better. So let's see how we can reach.

Sure, sir. And given we have won such a big order, are we looking for winning more similar orders both domestically as well as globally? Or are we happy with what we have and now focusing on execution? What is our thinking, sir?

No, no, we are definitely looking for more opportunities as well, and we are capable along with the JNK Global, we are qualified and we are capable to execute similar projects. And this order itself gives us also more reference and more capability in terms of getting qualified for further larger projects in the upcoming as well.

Is there any peak revenue potential? Do we talk about that or peak potential, how much we can do annually?