- Blue Star upgraded to Buy, Voltas rating retained by HSBC with revised target prices
- Room AC industry grew 25% in Q1FY27; Voltas led with 17.3% secondary market share
- Voltas RAC volumes rose 45% YoY, outperforming industry growth and gaining market share
The Indian room air conditioner market had a strong first quarter, but HSBC sees a widening gap between the two leading listed players. The brokerage has upgraded Blue Star to 'Buy' from 'Hold', while retaining its Buy rating on Voltas. It has kept Blue Star's target price at Rs 1,780 and cut Voltas' target to Rs 1,450 from Rs 1,460.
HSBC estimates the room air conditioning industry grew 25% in Q1FY27, and the brokerage believes Voltas fared better than Blue Star during the quarter. Voltas reported a 17.3% secondary market share in room air conditioners, a four-percentage-point lead over its nearest competitor, according to HSBC.
Its RAC volumes grew 45% YoY, ahead of the industry's growth. Voltas also gained market share in washing machines and refrigerators.
Blue Star's summer performance was more mixed. HSBC said the company recorded 6% growth during the January-June summer sales period, from a high base, while margins remained stable despite limited price increases.
Blue Star's Margin Outlook: Key Stock Trigger
HSBC has cut estimates for both companies, mainly because of lower margin guidance. For Blue Star, management expects FY27 UCP margins of 6.5% and MEP segment margins of 6%-7%, with a margin review expected around August-September.
The brokerage said Blue Star's Segment 2 EBIT margin fell to 2.9% from 5.8% in Q1 because of delayed summer inventory and an inability to fully pass on a 13% cost increase. HSBC expects the company to pass on only 5% of that increase.
For Voltas, margins will remain a key monitorable. The company has reached a 9.4% washing-machine market share and 7.4% refrigerator share, while its Voltek range has also gained ground.
HSBC sees the broader cooling market benefiting from demand across commercial cooling, healthcare and data centres. Blue Star's data-centre projects business remains one of the areas the brokerage is watching, while Voltas is focusing on its RAC leadership and expansion in commercial air conditioning.
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