Blue Star Q1 Results Review - Continues To Positively Surprise Us: Nirmal Bang

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Nirmal Bang Report.While Blue Star Ltd.'s topline was below our estimate by 7.6% due to lower-than-expected growth in electromechanical projects, Ebitda margin was above our estimate by 88 basis points due to higher-than anticipated margin growth in EMPS.Blue Star maintained its room AC market share in Q1 FY25 at 13.75%. Volume growth in RAC ranged from 70% YoY in April, ~65% YoY in May and close to ~20% in June (on account of shortage). Industry volume growth was ~50-60%. Blue Star took a price hike of ~3% in RAC in June’24 – mainly a commodity cost + ocean freight cost pass through. Channel inventory remains under 30 days.Under EMPS, Upward traction in factories and data centre plus pick up in infra cycle are expected to pump up order book growth in FY25. Currently, the company is focused on free cash flow generation and profitability, by expediting the speed of execution of its order book and collection of dues. We draw high comfort in Blue Star’s business model due to its strategy of chasing profitability and FCF, presence in high growth Comm. Ref. and high-quality order booking from EMPS. While we remain structurally positive on long term prospects, the stock has run up ~65%+ year CY24. As a result, we maintain Accumulate with SOTP-based target price of Rs 1,550. This implies a blended PE of 42 itimes on June-26E EPS and it is at ~10% discount to the five-year historical average PE multiple on one-year forward basis. We believe that the multiple is fair and adequately captures:~30% EPS CAGR over FY24-FY26E, andpost-tax RoCE of ~22% in FY26E. Nonetheless, we believe it is a long term compounder, and therefore, it should be accumulated at every dip..Click on the attachment to read the full report:.Q1 Review: Blue Star's June Quarter Net Profit Up 12% Year-On-Year.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Blue Star Q1 Results Review - Continues To Positively Surprise Us: Nirmal Bang

EMPS outlook remains strong; margin improvement – a positive, adds the brokerage.

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