Blue Star Q3 Results Review - Strong Quarter; All Segments Driving Growth: Nirmal Bang

Nirmal Bang Report

While Blue Star Ltd.'s topline was above our estimate by 5% due to higher-than-anticipated growth during festive season, Ebitda margin was in line with our estimate.

Blue Star improved its market share by 25 basis points to 13.75%, with South, West and East (in that order) doing well. North region still has significant scope to grow (market share usually 200 bps lower).

For FY24, while room AC industry is expected to grow by 15%, Blue Star’s is expected to grow by 20%. Competition in RAC segment is expected to remain intense going forward.

We draw high comfort in its business model due to its strategy of chasing profitability and free cash flow, presence in high growth commercial refrigeration and high quality order booking from electronic manufacturing services and packaged AC systems (EPAC).

While we remain structurally positive on the long term prospects of the business, the stock has had a good price run-up recently (up ~20% in past 40 days).

As a result, we downgrade Blue Star to 'Accumulate' with SOTP based target price of Rs 1,215 (39 times blended price earning on FY26E earning per share). It should be accumulated at every dip as we believe it is a long term portfolio compounder.

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