Blue Star Remains A Solid Long-Term Compounding Story, Says Nirmal Bang Maintaining 'Buy'

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Nirmal Bang Report

We have strong confidence in Blue Star Ltd.’s business model, especially its disciplined focus on profitability and free cash flow generation. We upgraded the stock after its Q4 FY25 results as we believed the weak summer season was already priced in. Since then, the stock has rallied ~20%.

We continue to believe Blue Star is well placed to ride the room AC industry tailwinds with its B2B businesses also showing strong growth momentum.

Backed by strong fundamentals and long-term growth drivers, we maintain our Buy rating with an SOTP-based target price of Rs 2,180. This implies a blended P/E of 48x on FY27E earnings, in line with its three -years average and at a ~5% premium to its five-years average.

We believe this valuation fairly reflects key strengths:

1. ~24% EPS CAGR over FY25-27E, and

2. ~19% post-tax RoCE by FY27E.

In our view, Blue Star remains a solid long-term compounding story.

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