KR Choksey’s research report on Blue Star

Blue Star Ltd. reported Q3FY18 revenue of INR 9,813 Mn with growth of 5.9% YoY and 17.4% QoQ which was mainly high demand of cooling products. However, there was poor performance by Electro-Mechanical Projects/Professional Electronics. Electro-Mechanical Projects & Packaged AC segment grew by 4% YoY and Professional Electronics segment de-grew by 26.6% YoY. EBITDA for Q3FY18 was INR 513.3 Mn which grew by 46.3% YoY and 11.8% on QoQ, with margins of around 5.2% which decreased by 26 bps QoQ and increased by 144 bps YoY.

Outlook

Blue Star’s unitary product segment has always outperformed the market growth, helping to grow both top line and bottom line. During this quarter the company has witnessed slow growth in the Electro Mechanical Projects and packaged Air - Conditioning segment due to GST and lower capex from the private sector. With a growing order book and new product launches the demand for consumer products is increasing despite of some macroeconomic hurdles like demonetization and GST, we anticipate top line to grow by around 15-16% YoY on a consolidated basis. Currently, the stock is trading at P/E of 26.9x FY20E, we maintain our recommendation and rate the stock with a "BUY" rating with a target price of INR 890 representing an upside of 23.5%.

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 15 Feb 2018, 06:43 AM