Our interaction with JNK India led to the following conclusions: JNK India’s legacy low-margin orders (NRL, IOCL) delayed by site and client issues are expected to conclude largely by Q2FY26, with minor spillover into Q3FY26. From Q3FY26, high-margin projects like Reliance and HPCL will dominate revenues, supported by a shift to cost-based revenue recognition for smoother margins. The recently won Ultra Mega order from JNK Global ensures strong revenue growth visibility for FY27. Additional order prospects worth Rs6.8bn domestically and Rs25bn in exports could further strengthen FY28 growth if even partially secured. Petrochemical and new refinery projects from GAIL, IOCL, Nayara, and BPCL are expected to drive future demand, aided by JNK’s growing execution track record and its Chemdist JV in green hydrogen. Overall, strong execution in 2HFY26, revival in margins and an end to overhang on growth are key drivers of our BUY rating, though the target price is trimmed to Rs390 (from Rs400) to reflect legacy margin impacts.
Issues like site availability, weather, client approvals were the major reason for delay in completion of NRL and IOCL orders. Further, the old completion-based revenue recognition methodology has led to poor margins in last few quarters. The low margin legacy orders are expected to be largely completed in Q2FY26, and some minor slippage is expected in Q3FY26. However, Q3FY26 will be largely dominated by revenue from the high margin orders like Reliance and HPCL. Further, switching to the new cost-based revenue recognition methodology will ensure margins are more stable across quarters. Large orders, like Ultra Mega and Reliance, have high margins due to their operating leverage.
Ultra mega order received from JNK Global on 6th October (roughly 5-10% of the total capex of the refinery) very well sets a certainty on revenue growth in FY27. This order will be fully executed in 30months starting July’25. While JNK Global has received a total of Rs26bn order from the refinery, only Rs10.5bn was assigned to its Indian entity. If we had to exclude Rs8bn value of bought out items from the total order size, there is still a substantial portion of order left with JNK Global which is expected to transpire to JNK India in the coming months. Additionally, JNK India is working on Rs6.8bn worth of domestic order (to be finalized in 1HFY27) and Rs25bn of export orders (to be finalized in 12-18months – less competition in bidding). We expect good probability of JNK getting awarded at least 20-30% of these orders, which in turn will seal the revenue growth in FY28.
In the foreseeable future, petrochemical projects are expected to drive the order book for JNK India. GAIL & IOCL are expected to spend on expanding petrochemical capacities. New refineries by Nayara and BPCL are expected to drive demand for heating equipment. With execution of large orders, JNK India has accomplished a strong Past Track Record (PTR) to take up more large EPC orders. The JV with Chemdist also has good prospects as they have patented technology (Ethyl Acetate by-product) for green hydrogen and JNK has its expertise in designing and EPC. Some existing orders received by Chemdist will be transferred and executed under the new JV. JNK India will also bid for large orders worth Rs2bn through this JV in the hydrogen space.
We value JNK at 25x Sept’27E earnings (unchanged) to arrive at TP of Rs390/share (previously Rs400/share) and retain BUY rating. We lower TP to Rs390(previously Rs400) due to a cut in margins, to account for the legacy orders. At CMP of Rs296, stock trades at 20.5x FY27/ 18x FY28 PE. Key risks: Delay in order execution and failure to deliver on margins.
Company website: https://www.jnkindia.com/
| Rating | Buy |
|---|---|
| CMP | INR 296 |
| Target Price | INR 390 |
| Upside | 30% |
Click to download the full JNK India Ltd. 2Q FY26 Company Update
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Unit No. 803-804A, 8th Floor, X-Change Plaza, Block No. 53, Zone 5, Road-5E, Gift City, Gandhinagar - 382050, Gujarat
Ahmedabad
“Monarch House”, Opp Prahladbhai Patel garden, Near Ishwar Bhuvan, Commerce Six Roads, Navrangpura, Ahmedabad – 380009
Mumbai
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