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Nirmal Bang Report
Given that the industry has seen a sharp increase in room air conditioner capacities in recent years and the penetration of RAC hasn't increased proportionally, we believe that the industry currently has over capacities and full absorption of the same is expected to materialise only FY27 onwards.
We maintain 'Buy' on Blue Star Ltd. with a revised SOTP-based target price of Rs 1,100 (39 times blended price-to-earning on FY26E earnings per share). We like the company's strategy of chasing profitability and free cash flow (not market share), maintaining its leadership position in the commercial air conditioner business and its high quality order book.
We maintain 'Accumulate' on Voltas with a revised SOTP-based target price of Rs 985 (40 times blended PE on FY26E EPS).
While we remain positive about the unitary cooling product business in the medium-to-long term, continued losses in EMPS plus not so encouraging feedback for Volt Beko products pose risk in the near term and could continue to suppress overall margins.
We currently have a ‘wait and watch' stance on Voltas Ltd. and any price correction to ~Rs 850-875 is a favorable entry point, offering a good risk-reward ratio.
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