JNK India Limited (JNKINDIA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to JNK India Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh Bendre from ICICI Securities. Thank you, and over to you, sir.

Thank you. Good morning to all. On behalf of ICICI Securities, I welcome you all to the Q1 FY '27 earnings call of JNK India Limited. Today, we'll have retests from the management, Mr. Arvind Kamath, Chairperson and Whole Time Director; Mr. Dipak Bharuka time Director; and Ms. Annie Varghese, Senior Manager, Investor Relations. We'll begin with opening remarks from the management, which will be followed by a Q&A. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining JNK India Limited Q1 FY '27 Earnings Conference Call. I hope you have had an opportunity to go through our financial results and investor presentation, which are available on the company's website and on the stock exchanges. Before I discuss the business outlook, I would like to highlight an important aspect of our quarterly performance and the inherent seasonality of our business. Our revenue recognition is typically back-ended given the project-based nature of our business, the engineering and procurement cycle, vendor supply and the timing of project execution. Historically, Q1 contributes about 10% to 15% of our full year revenue, while H1 contributes 30% to 35%. 2 accounts for the remaining 60% to 70% of our annual revenue. Therefore, sequential improvement in revenue through the year is a normal feature of our business, with Q3 and Q4 being significantly stronger than the first half. We continue to work towards making execution more uniform. However, the project cycle and supply time lines mean that some degree of seasonality will remain. Our order book as on 30th of June 2026 stood at INR 1,801 crores, providing us with a very healthy base of executable projects for the year. Our revenue growth guidance of around 20% to 25% remains intact. We also maintained our full year EBITDA margin guidance of about 12% to 14%. We are progressing on projects such as BPCL Bina project, where execution is underway, and a significant portion of the project revenue is expected to be recognized during FY '27 and also on FY '28. This provides us with a good base of revenue visibility as we move throughout the year. We continue to see encouraging traction across both domestic and international markets. Our current overall opportunity pipeline is more than INR 6,000 crores with a broadly balanced 50%, 50% mix between international and domestic opportunities. While eating continues to remain a core strength for us, about 60% of the current opportunity pipeline is related to the eating equipment, while the remaining 40% comprises process plan and other special fabricated equipment and adjacent technology-led EPC opportunities. This diversification is strategically important for us because it allows us to leverage our existing engineering, project execution and qualification capabilities across a much broader opportunity set. On the export side, Africa remains an important market for us, particularly countries such as Nigeria and Ethiopia, where significant investments are being planned across refining, petrochemicals and fertilizers. We also continue to see opportunities across the Middle East and other international markets. As we have highlighted earlier, the qualification and execution of a large and technically complex projects provides us with an important advantage as successful execution since our ability to qualify for similar projects with other customers and licensees. Alongside this opportunity pipeline, we also entered FY '27 with a healthy execution base with several large projects already underway. At the same time, we remain focused on disciplined order selection and execution. Our objective is not simply to grow the order book but to build a sustainable order pipeline with healthy margins. manageable execution requirements and attractive long-term opportunities. At the same time, we are taking further steps to diversify our business into new and adjacent opportunities that can become important growth avenues for JNK India over the medium term. While heating equipment continues to remain a core trend for us, we are increasingly leveraging our existing engineering fabrication and project execution capabilities to address opportunities beyond our traditional areas of operation. Our such upcoming revenue are the offshore and metals and minerals industry with a focus also on renewable energy. Importantly, this is an extension of capabilities that we already possess rather than an entirely new area for us. We have the required engineering and execution capabilities, and our focus now is to strengthen these further for the specific requirements of offshore applications and leverage them to address the larger opportunity emerging in this segment. We believe that these adjacent opportunities can help us expand our addressable market while building on the capabilities and expertise that we have developed over the years. This is an important part of our broader strategy to gradually diversify JNK India beyond its traditional heating equipment business and reduce the dependency on large CapEx-based orders in the refining and petchem business. I would also like to provide some context around the recent order cancellation. The large export order received on June 8, 2026, was subsequently canceled solely due to the technical approval requirements. The international EPC contractor who had awarded the contract to JNK India was confident of securing the required technical approval from the licensor. However, the approval did not materialize in time. Importantly, the cancellation happened at a very early stage, and we had not incurred costs against this order. Therefore, this cancellation does not result in any material cash loss for the company. I would also like to emphasize that this is an exceptional and rare occurrence and is not related to our execution capability, technical performance, efficiency or commercial competitiveness. Licensing and regulatory approvals are an inherent feature of the industries in which we operate and in many cases, themselves constitute an important entry barrier. In this instance, the cancellation was primarily driven by the end user licensing and approval requirements and not by any issue with J&K India's capability or execution. ow moving on to our joint venture of JNK Chemdist Technologies. Chemdist is an important part of our long-term strategy as we expand beyond our traditional engineering and heating equipment business into green hydrogen, sustainable fuels and chemicals. The business has a relatively high fixed cost base at this stage, and therefore, the lower revenue typically seen in the Q1 results in the operating losses. However, ever, the JV has contributed 8.8% to the group revenue in the quarter 1 of FY '27. However, as the business scales up through the upcoming quarters, we expect the operating leverage to improve meaningfully. More importantly, we remain confident about the long-term potential of this business, particularly given the technology capabilities and opportunities we are pursuing in green hydrogen, sustainable fuels and related areas. Overall, as we look at financial year '27, we see a healthy combination of projects already under execution, a sizable and increasingly diversified opportunity pipeline and new avenues that can expand our addressable market over the medium term. Our focus remains on executing the existing projects efficiently, converting the domestic and international opportunity pipeline into quality orders and continuing to build capabilities in adjacent and technology-led areas. Coming to consolidated financial performance. Our order book as on 30th of June stood at INR 1,801 crores Consolidated revenue grew by 0.6% year-on-year to INR 186 crores in Q1 FY '27. EBITDA for the quarter grew by 3.1x year-on-year to INR 21.9 crores in Q1 FY '27, with the margin stood at 11.8% in Q1 FY '27 as compared to 7% in the last year. However, as a stand-alone for JNK India, the EBITDA margin stood at 14% over the last year's 7% compared to last quarter. PAT for the quarter grew by 8.5x year-on-year to INR 9.6 crores in Q1 FY '27 with PAT margin of 5.2% in this quarter as compared to 1.1% in the last quarter on a consolidated level. So with this, now we are open for any questions.

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

Congrats for sound performance. Just 1 question. Like you have addressed the up issues in the business categories want to diversify it. I would not pay petition but say we want to more diversify our business, like say, more on a recurring business rather than having a one-off type of project. So like sir, what is our target now on a medium-term basis? Like the over much years, what revenue levels we are going to target, given the fact that a renewed focus on other business segments as well.

Good afternoon, Kamlesh. Basically, I think we have given a revenue guidance for this year in terms of growth of about 20% to 25%. So I think that's the kind of a growth that we do hope to achieve on a medium term year-on-year. That's the kind of plan that we have. And that is where we're kind of diversifying into a bit more broader horizon into the other sectors and also the product and the capabilities in terms of the technology-led EPC business, so that we can have this kind of a uniform growth year-on-year.

Like sir, I do understand that you have a target of 20%, 25% growth for this year. But like say in 28, 29. So given the current capacity what maximum revenue we can do because, like say, entering into new businesses that will take its own time. So it is not going to come up in a very sooner manner. So what capabilities do we have in those other exams where the revenue can be ramped up on an expedited manner. Where do we see beyond this year?

Okay. Kamlesh, yes, we understand your question. So you -- basically, you want to know more about our diversification strategy and what targets we are having on the revenue side to come for maybe medium term, 3 years or 4 years, 5 years. So as Arvind told you in his opening address, so coming to around 3 to 5 years, we want to move this nonheating segment around 40% of our revenue should come from the -- and that is the target we are having. And accordingly, we are diversifying in various items like a process plant, still metals and minerals business and many other businesses. So as we -- as you rightly said, we like to focus more on the recurring business than one of the opportunities. And it has its own entry barriers. It will take it. We will not be able to ramp up this diversification in a year or 2. But going forward, we anticipate another 4 to 5 years' time, we should be able to get a healthy mix of around 40% from this diversified strategy which we are implementing now and going forward. I hope I could answer your question.

Yes. And lastly, for having update on [indiscernible] order.. And apart from that, like the reformer, where are the in terms of getting those orders? And what is our order inflow guidance for this year?

Yes. See, on the [indiscernible], as you know, we had -- we were the supplier for the Phase I. Now Phase 2 is still under the discussion and we stand a good chance of getting it. Of course, for the obvious reason, it will be the repeat order for us. But we are still under the discussion. And we do not have anything which we can disclose publicly until we get some commitment from some official commitment from the client.

And guidance on the order from this year, sir?

This year, we expect our order book as...

Basically, we have a pipeline of about INR 6,000 crores, Kamlesh. You might have seen that. And traditionally, our hit rate has been 20% to 25%. So I think we're kind of expecting a similar rate this year as well. Yes.

The next question is from the line of Deepak Purswani from Svan Investments.

Congratulations for good set of numberts. Sir, just wanted to consider. Just wanted to ask, in terms of big pipeline, actually, it has increased from INR 4,000 crores to INR 1,000 crores during this time. As you can get the broader sense, which are the key projects that we needed in the bid pipeline. And secondly, from the bidding to wording steps, how has been the momentum at this point of time, how are we seeing the development at this point of time? How these are setting up? Are they happening at a product like or this is a slowdown because the prices, if you can get a broader sense on these aspects that will be really helpful.

Yes, Deepak, basically, on the big pipeline, as I mentioned earlier, the export of outlet is about 50%. That is around INR 3000 crores. So that is mainly on the heating equipment. And as we already also informed in the previous question and answer, that these could likely to get finalized soon. And the other opportunities are domestic, which is INR 3,000-plus crores. They are mainly more of non-heating equipment type of business. So they're on technology lend EPC projects and in renewable energy, metals and minerals and also into oil and gas. So these could get finalized in anywhere about, say, 3 to 6 months or 6 to 8 months time. So overall, we expect that all this pipeline should get finalized in this financial year.

Okay. Sir, just continuing on this part, would it be fair to say this big pipeline has increased from the last time to this time, mainly because of the nonrenewable part -- nonheating part?

Yes. We would agree with that. Yes, that's true, mainly because of tying into the other -- yes.

Okay. And secondly, sir, if you can also just give a sense in terms of the nonshipping part, what would be your scope of work in these kind of industries? And I mean, though you mentioned about over a bit of time, 40%, but how big can be the opportunity from this part? And what about getting the qualification necessary regulatory requirement. If you can just share the broader perspective on all these aspects that will be really helpful.

Deepak, on the scope. As far as scope is concerned, most of these projects, we have a common scope like our heating equipment. It will be engineering, procurement, fabrication and instruction and commissioning. And way to -- of course, there are -- rightly as we stated in the opening address, there are entry barriers and entry barriers are mainly related to the technology. So our strategy is to tie up with the major technology providers in this field and get ourselves qualified based on our experience in the heating equipment or process plant, which we are currently executing. That is how -- otherwise, skill set remains the same. It's the same engineering same fabrication facilities, same construction capabilities. So basically, though it is coming from the nonheating equipment, our manpower, our capabilities or competencies remains almost 70%, 80% end. Whatever little addition we need to do in the capabilities is we are doing over the period of time because we are already executing the project in the nonheating equipment like one for the data projects. We are -- Tata Steel, we are executing [indiscernible] for HPCL, we are executing. So there are things different we need to do as far as our competitive things are concerned.

Okay. And also in the previous call, we had also mentioned about some of the opportunity we are exploring in the power segment. So if you can just give a broader sense of that part, sir.

I think I am not able to recall...

About the NPTC orders.

Yes, but that's not in the power. That's in the -- they're in the [indiscernible] more on the -- I mean green about green. So it is not in the power sector. diversifying in some of these fertilizer and renewable sale. And those are the opportunities, which we are trying to explore. And we -- our plan is to bid for those opportunities, and they are part of our bid pipeline.

Okay. And finally, just wanted to double chip on the margin front. I mean this time, our gross margin is actually improved but EBITDA margin has come down. And one of the reasons which I can see is increase in the employee cost. So just wanted to take out this is general for the ramping of the business. So you increase the manpower and which has led to the short-term transitionary compression in the margin, but on the broader side, it is still in intact for the broader trajectory?

Yes, that's correct, Deepak. But just to clarify, as I mentioned in the opening remarks as well, if you break it down, JNK India alone, we have achieved EBITDA which is as per the guideline, and I think which is what our kind of what we are looking at and which is also good because even with the comparing lower revenue about INR 170 crores, we still could achieve our EBITDA of 14%. Now what has happened is with Tim is being -- I mean, okay, it's being the first quarter and it's just the initial stages. So there -- there has been a loss of operating loss of about INR 3.6 crores -- so that's why the EBITDA has come in to about 11.8%. But I'd say last year, quarter-on-quarter, it's very, I think, substantially good figures. Number one. Number two is also considering the lower revenue of Q1, which is a cyclical -- the nature of the business is considering that also, I think is a good figure we could what we have achieved.

Okay. Eventually, from the ground....

Sorry to interrupt you, Mr. Deepak, but can you please rejoin the queue a...

Just a follow up of the final question. Just wanted to confirm on this part I mean, just continuing on the margin front from the hike in the raw material drives and everything have we faced any issue on this part or still everything is on track and everything is passive into the country on -- or how should we read into it?

Yes, there are commodities price fluctuating. But as far as ongoing projects are concerned, these are already factored in our cost in -- and most of the orders are already placed. And we place the order on our sub vendor on a fixed price basis so that whatever the fluctuation is happening, it is not having any major impact on our margin for the ongoing projects.

[Operator Instructions] The next question is the line of [indiscernible] from ICICI Securities.

Congratulation good set of numbers. I have 2 questions. First, being -- can you please help us with the breakup of 60 million order prospects between which large project cuts in Utica international. And second, being by JNK [indiscernible] to open overseas office in Iraq, like what kind of order prospects you can see in medium term there.

Yes, [indiscernible]. Basically, as I mentioned earlier, we -- currently, we have about INR 3,000 crores of with pipeline in exports and about INR 3,000-plus crores in domestic and exports is most of them are related to the heating equipment business and domestic is mainly the non-heating equipment business, focused on various opportunities, various project base opportunities in renewable energy segment, metal and mines, et cetera. And in terms of answering your question about Iraq, Iraq now is they are coming up with a lot of projects in oil and gas and refining and Allied areas, which is our core competence as well. So we are also looking at kind of expanding our business like as we have done already business in many of the country, so we feel Iraq also could be a good opportunity. But yes, we are looking at the options and that's why we have just opened up we have kind of taken a Board approval yesterday to register a branch office, and we do have an agent there, and there are some upcoming opportunities there as well.

The next question is from the line of Nikhil Kanodia from Sunidhi Securities.

So first of all, congratulations on the set of top line growth and the kind of bid partner that you have. So while you have answered a few of my questions, I hand to you on please straightforward questions and a few strategic broad-based questions. So the thing is that you are getting into our businesses. So if you can unify what could be the task and what component is already included in the bid pipeline? Or are we like yet to see anything in that sense, what would be the top line that we can get from the new business in the margin profile? And when can we see material contribution coming in the top line from those businesses.

Yes. Nikhil, yes, basically, in the big pipeline, mainly in the domestic bid pipeline, there are whatever the new areas we mentioned, metals, minerals and offshore, some of the smaller bits are involved there as well now. So the opportunities are in that area. And as we mentioned earlier, basically, we want to move wherein we are able to get in the midterm looking at 60% from heating equipment and 40% from the Allied business because this business also has a lot of entry barriers and kind of with the technology partner, how look large bid, you can get qualified is also a question. And we do not want to take substantial exposure to start with, where we would like to take a comparatively smaller opportunities so that we also get more confidence going above. And in terms of the margins, we are always looking at in the similar margin range of whatever our guided EBITDA margins are there in a way from 12% to 14% in that range. So we're very clear that any business we entered, we kind of look to maintaining this margin.

So sir, number one, what would be the turnover there? And net, you said that, obviously, in these new businesses, I understand that in the businesses that you are already there, your written has already been put in the kind of qualifications and the other amounts that you have. So in these businesses, like what is the right to win that you have? And what could be the TAM, the addressable market.

Basically, the TAM in this in terms of -- obviously, every business has a different in, say, offshore, currently only in India, the TAM is somewhere around the $300 million to $500 million. And in metals and winders, it is about $500 million to $1 billion. So that's the current TAM only in India, not mentioning about any of the export opportunities. And Yes. So basically, we are trying to get whatever we could. However, the sizes of these opportunities, what we are looking at is anywhere between something like, say, around $30 million to $50 million to $60 million kind of a project. So the advantage, what we have is being a midsized kind of a company which is focused on engineering procurement and also construction the capabilities, what we have. Today these segments up to say INR 1,000 crores, there are not really many good professional organization, which can handle these projects effectively because of the companies which are known in this industry like [indiscernible], for example, or technique or deep companies, they are going for a larger opportunities. They generally don't like to bid for the opportunities which are up to say INR 1,000 to INR 2,000 crores. So this is the kind of a signature we see is a good opportunity for us, and that's where we want to focus on.

So sir, having said that, this will be a new segment for us. So the -- hit ratio will be lower than 20%, 25% that you are claiming right now?

Yes, that is what we want to add. This being a new sector, we will be a bit cautious. So we are expecting our hit ratio should be anything around 10% to 12%, not more than that. And this will take time for us to crew qualification because we'll do many of these projects, we'll be bidding first time. So it may take a couple of projects for us to understand the dynamics and qualifications and mitigate. So we are not like for the heating segment, we have traditionally been 22%, 25%. Here, we are expecting around 10-odd percentage or eating ratio, at least to start within the next couple of years.

Okay. Sir, one last question that I have is from the parent Global. So if you can throw some light as to what sort of projects are we doing? How many projects you would have done for the global parent and also in the new businesses that you're getting into. So what can come from Global and what kind of business do you have stand-alone qualifications as we speak from the entire and the big partner that you have said.

See, on the business side, yes, as you know, we are doing BPCL Bina, the JNK Global. And there are a couple of projects we are bidding along with the JNK Global in India and outside. Definitely, I mean, as we try to tell you the projects in our order book from JNK Global, which are like the BPCL Bina, LCL project is there, then on USA project is there and Perama Phenix project. But they are all small biggest BPC now. And what are your next -- I think you asked 2 questions. I forgot.

So like in that sense, in the current orders, how much do you think JNK Global is going to contribute to like setup that we have about royalty and all of those things. In that sense, how much order are we expecting to come from JNK Global? And as we speak today, what is the mandate as to like what sort of projects can we do on a stand-alone basis, wherein like we don't need the linkage with the parent?

See, all domestic project, if we get qualified, we can do a stand-alone basis. all export project, we will be doing together. I mean, GeneGlobal will be getting the orders. and they will be subcontracting to us. It is a back-to-back basis. As far as the entire retail reformer and tracking financial concerned. But when it comes to incinators, players, those orders we are booking directly globally or within domestic market. There is no tie up to -- and there is no qualification of JNK Global in that sale. So this is how current arrangement is.

Okay. So last 1 small question if I can squeeze in.

Yes. Sorry. You asked what is your expected order books from JNK Global. Yes, as we said, that export orders mainly are emitting segment. So all those we are bidding through JNK Global, and those are all expected from JNK Gloabl.

Okay. So one last small question, if I can squeeze in. So the rating that you have told, so the setting up, so that will be a sales source that will be setting up. And obviously, the exports and everything will happen from the Mumbra facility, correct? Is the understanding correct?

Current, our mandate is this will be more of a registered paper office. Going forward, we will evaluate the opportunities based on case-to-case basis, we'll start with the copper sales office. And then we may add up engineering execution, depending on the requirement. Because in Iraq, it is a mandatory to have the local registered office to do the project there. And as a first step, we are hoping to register. I mean we have taken the approval to register the office there, and we will not have any setup as of now. But going forward, yes, we -- our plan is to build a proper setup as a sales office is concerned. And rest of the thing depends on the [indiscernible].

Okay. All the best for future, it's very heartening to see that we are still trying to increase the top line and diversifying our business to the sectors as well when we can.

[Operator Instructions] The next question is from the line of Ram Modi from PL Capital.

Just wanted to check, being our industry being a little bit on the working capital intensive side, and given our target growth rate of around 20%, 25% for next few years, where are we -- will we get constrained on the working capital side? Or we can support our growth with this -- support the growth without raising any funds here?

Yes. So basically, a couple of advantages what we have had and what we likely to have is also is that mainly business is coming from the companies like Reliance and also from the private company. And even in BPCL Bina, for example, the payment terms have been quite, I would say, more fairly were not too much of a negative cash flow is there, which helps in terms of the order execution without putting too much tail on the working capital. This has helped us in the large order execution. And the second point also because as we were explaining about JNK Global's role like BPCL Bina, for example, is through -- along with JNK Global and now some of the export opportunities, which we have paid is also along with the JNK Global. So this also helps us in terms of the working capital because they submit the bank guarantee and they get the payments and then the payment is passed on to us. So for us, working capital becomes more easier without even submitting the [indiscernible]. So I think with these 2 advantage being on the line, so we should be able to manage the working capital for quite some time now.

And will this be same for our new businesses because if those are -- will those balance on new business Budwineed to take on our balance sheet and do those orders?

I mean we are quite conscious about that. So to the extent possible, where any kind of a sizable opportunities, we take it with the staggered payment terms only -- unless it is a very small opportunities, which we really want to go to add on to our reference or something like that, only then we could look at those as -- with the comparatively lower advance or lower down payment.

Okay. So our business is basically...

Sorry to interpret you, Mr. Modi, but can you please in the queue as there are many participants waiting in the...

Only last question from my side.

Sorry sir, but there are many participants waiting. Please rejoin the queue. The next question is from the line of Sahil Sanghvi from Monarch Networth Capital.

Congratulations for resilient 1Q. And my first question is, could you give some examples of the kind of projects you aim to undertake under this new diversification that is announced in the metals, minerals, general engineering side, just to get more sense of what kind of projects will be.

So on the metal sentinel side, now we are -- first, we are bidding for a couple of projects on the material handling side. for example, we'll not be able to give you the specific project details. But yes, the type of project is material handling and processing all electric car buns which they require for the still melting and formatting. So those are the kind of projects we are looking for bidding in the first phase. And on the other like offshore also, we said we are also bidding for some projects on the offshore or EPC, like some Nanoiria plant, which is being setup being proposed by some of the PSUs in India. And those are the opportunities which we are exploring on postperic acid plant or a few on the petrochemical side. These are the opportunities which we are exploring, and we are planning to pick for these projects.

Okay. Okay. So a follow-up on this would be that will we need some past track record, I mean, you need some partner on this front or technical partner or some base rerecord. Or we can scale up ourselves as we keep on taking up new projects?

So there are -- always for the qualification, there are 2 parts. One is the technology and other is EPC. So as far as EPC and financial experience is concerned, we are good to go. We have no problem. But when it comes to the technology, we need a technology partner, and we are already tied up with such technology partners with whom we are currently bidding for the ongoing opportunities.