Blue Star Ltd. share price target

BSL is well-positioned to capitalise on its brand and distribution strengths, to venture into other product categories like water coolers/ purifiers, air coolers/ purifiers. The base product (ACs) is expected to grow at ~20% over the next three to four years, by when other product categories would also mature. We expect a revenue/PAT CAGR of ~17%/45% respectively over FY17-19E, based on which we arrive at a FV of Rs 634/share

Revenues in the Electro-mechanical projects & packaged air conditioning (EMP & PAC), Unitary product (UP) and Professional Electronics & Industrial Systems (PEIS) increased by 18%, 20% and 8% YoY respectively. While EBITAM increased in EMP & PAC (+170bps YoY) and PEIS (+650bps YoY), it declined by 10bps YoY in UP. Though the market for room air conditioner (RAC) grew by 10% YoY, BLSTR reported 17% YoY growth in RAC and100bps increase in market share to ~11.5%. Order book in EMP & PAC grew by 19% YoY to Rs19bn (Rs16bn YoY). Upgrade FY18/19 EPS estimates by 2.4% and 11.9% respectively on higher revenue...

BSL posted an 18.5% rise in 4QFY17 consolidated net sales to INR 13.8bn supported by a 20%/18% growth in Unitary Products (UP)/ Electro Mechanical Projects (EMP) sales. Professional Electronics & Industrials Systems (PEIS) sales rose 8% to INR 568mn. EBIT margins in UP/EMP/PEIS were stable at/rose 185bps to/rose 529bps to 10.5%/4.8%/19.4%. EBITDAM was stable at 5.5%. Adjusted net profit fell by ~6% to INR 372mn; a result of lower other income (down 48% to INR 37mn) and higher effective tax rate (up 813bps to 26.4%). BSL would have grown 10 percentage points more than the industry in 4Q. With a market share of ~11.5%, management expects...

Blue Star's standalone numbers for 4QFY2016 were subdued on the margin and bottom-line front mainly on account of the company having to provide for the last leg of the legacy orders. Sans the provision for legacy orders, the operating profile was in-line with our estimates. The top-line grew by 9.8% yoy while the margin contracted by 170b..

Blue Stars standalone numbers for 3QFY2016 have come in in-line with our estimates. The top-line for the quarter reported an impressive 15.1% yoy increase to Rs686cr. Raw material cost as a percentage of sales increased by 175bp yoy to 68.9% but the same got offset by a 94bp yoy and 341bp yoy decline in Employee and Other expenses as a percentage of sales to 9.7% and 17.4%, respectively. The EBITDA margin expanded by 259bp yoy to 4.1%. There was an exceptional loss of Rs2cr during the quarter due to bonus expenses for earlier years. Adjusting for the exceptional item, the net profit came in at Rs7cr. Improvement in macro scenario to support growth: The Cooling Products Division (CPD) has been the key performer for the company and is expected to carry the baton till the Electro Mechanical Projects and Packaged Air-conditioning Systems (EMPPAC) division fully recovers on the back of an expected improvement in the macro scenario. Slow order finalization and execution has impacted the EMPPAC divisions performance, which however is likely to rebound as market conditions improve. The company has been brisk in adding orders after clearing out a large chunk of legacy orders. The companys room air conditioning...

Age Old Company creating New and Innovative Products: Since 70 years, Blue Star is providing new and innovative cooling solution products to its customers. Despite the economic slowdown in past few years, the cooling product segment has always outperformed the market, this segment is expected to grow at 18.2% CAGR during FY16E-FY17E. The total order book recorded for Q1FY16 was approximately around Rs.12000 Mn. Major growth driver for this segment is the increase in sales of room air conditioners, increase in disposable income, shift in consumption pattern and standard of living.