JNK India Limited, a prominent player in the engineering services sector, has announced a significant development in its business operations. The company has secured a notable order from its promoter, JNK Global Co., Ltd., Korea, for a refinery cracker furnace project in India.

Project Details

The order entails JNK India providing design and engineering support services to JNK Global for the Cracker Furnace Package of a refinery project in India. This project marks an important milestone for JNK India, showcasing its expertise in the field of refinery engineering.

Order Specifics

• Client: JNK Global Co., Ltd., Korea
• Nature of Work: Design and engineering support for Cracker Furnace Package
• Project Location: India
• Project Completion Date: December 21, 2027

Order Classification and Value

The company has classified this order as 'Significant' according to its project classification system. Based on JNK India's disclosure, a 'Significant' order falls within the range of ₹0.00 to ₹50.00 crore in value.

Related Party Transaction

It's worth noting that this order falls under the category of a related party transaction, as JNK Global is one of the promoters of JNK India. However, the company has affirmed that the transaction is being conducted on an 'arm's length basis', ensuring fairness and transparency in the deal.

Implications and Outlook

This order not only strengthens JNK India's order book but also demonstrates the company's capabilities in handling complex refinery projects. The extended timeline for project completion, stretching to December 2027, suggests a comprehensive and intricate scope of work, potentially leading to sustained revenue generation over the project duration.

JNK India's ability to secure orders from international entities for projects within India highlights its competitive edge in the domestic market. This project could potentially enhance the company's expertise in refinery cracker furnace technology, positioning it favorably for similar projects in the future.

As the energy sector continues to evolve, with refineries playing a crucial role in India's industrial landscape, JNK India's involvement in such projects may contribute to its growth trajectory in the coming years.

Investors and industry observers will likely keep a close watch on JNK India's execution of this project, as it could serve as a benchmark for the company's performance in large-scale, long-term engineering endeavors.

JNK India reported a 13.5% year-on-year increase in revenue for Q1, reaching INR 1,030.00 million. However, the company faced significant margin pressure due to legacy projects, with EBITDA margin compressing to 7.00% from 13.40% in the same quarter last year.

Financial Performance

The company's financial results for Q1 show:

The margin compression was primarily attributed to legacy projects under execution, which impacted overall profitability. The company has transitioned to a cost-based revenue recognition method, which is expected to stabilize margins in future quarters.

Order Book and Business Outlook

As of June 30, JNK India's order book stood at INR 9,828.00 million, with the following composition:

• 79.40% from heating systems
• 12.80% from process plants
• 7.80% from flares, incinerators, and other renewables

Domestic orders account for 90.90% of the total order book, providing strong revenue visibility. The company anticipates two large order finalizations worth INR 2,000.00-3,000.00 crores in Q2.

Green Hydrogen Joint Venture

JNK India has entered into a joint venture agreement to develop green hydrogen and other sustainable fuel technologies, as well as critical engineered equipment for the chemical and pharmaceutical industries. The company will hold a 51% equity stake in the newly formed entity.

Key points of the joint venture:

• Partners: Mr. Sunil Dhole and Mr. Tushar Wagh, founders of Chemdist Group
• Initial investment: INR 10.00 crores by way of preference capital
• Working capital support: Approximately INR 50.00 crores in the first year
• Expected revenue contribution: 8-10% of JNK India's revenue
• Projected growth: 15-25% of JNK India's revenue within 5 years
• Estimated EBITDA margin: 10-12%

Management Commentary

Arvind Kamath, Chairperson and Whole-Time Director of JNK India, stated, "The first quarter was centered around project execution. Our teams remained focused on delivering ongoing assignments across domestic and international markets."

Pravin Sathe, CFO, added, "The impact of higher costs related to the earlier projects is likely to continue in Q2 as well. We continue to focus on disciplined execution, cost control, and alignment of internal systems to support timely delivery."

Future Outlook

JNK India maintains its guidance of 40-50% revenue growth with target EBITDA margins of 13-15% once legacy projects are completed. The company expects margin recovery from Q3 onwards.

The management remains optimistic about opportunities in the refining, petrochemical, and green energy sectors, leveraging its integrated capabilities across fire heaters, cracking furnaces, incinerators, flares, and process plants.