IGI Logo

BLSTR’s consolidated sales grew 19.5% YoY to Rs18.9bn, 6% above our estimate. Unitary Products sales growth was robust at 38% YoY to Rs7.3bn. Sales was driven by higher latent RAC demand in Q2 post muted summer, while Commercial Refrigeration saw healthy volume uptick. EMPS sales grew 12% YoY to Rs10.8bn aided by robust order book. Gross margin rose 160bps YoY to 24.8% led by cost control initiatives, higher scale and industry-wide lower ad-spends. EBITDA grew 43% YoY to Rs1.2bn leading to 110bps YoY rise in EBITDA margin to 6.5%, 90bps above our estimate. PAT rose 66% YoY to Rs707mn, above our/consensus estimate of ~Rs550mn each. BLSTR expects RAC sales to grow by 15% in FY24 (vs. 10% likely industry growth). The EBIT margin are likely to sustain at 8-8.5% in unitary products and 6.5-7% in projects segment. We tweak our PAT estimates for FY24E/25E by (1)%/5%. Retain ADD rating with a revised SOTP target of Rs900 (Rs780 earlier), post roll over to H1FY26E EPS.

Unitary Products: Higher latent demand lifts RAC sales; margin expansion healthy

Unitary Products sales grew 38% YoY to Rs7.3bn with a healthy EBIT margin of 8.4%, up 230bps YoY. BLSTR surpassed RAC industry growth (~30% in 2QFY24) as it grew 39% YoY with a market share of 13.5% in H1FY24. For FY24, it expects RAC to grow by 15% vs. likely industry growth of 10%. Festive sales during Onam and Durga Puja were healthy, while Diwali is also expected to be better. Commercial Refrigeration business saw healthy volume growth for deep freezers, water coolers and cold storages. Deep Freezers industry (Rs25bn in size where BLSTR has 28% market share), will continue to grow by 20% CAGR led by (1) rising penetration in smaller cities for sub-300 litre products and (2) Chinese imports becoming unviable due to tariff and non-tariff barriers. Capex earmarked for FY24 and FY25 combined is Rs6.5bn towards Sri City RAC plant, sub-300 liter deep freezers capacity, R&D (for building labs and product development centers), digitization and for incremental working capital needs.

EMPS & commercial AC: Healthy traction across sectors drive order book

EMPS sales grew 12% YoY to Rs10.8bn while EBIT margin stood at 6.1%, down 20bps YoY. Order inflow grew 47% YoY to Rs17.6bn. Order book grew 12% QoQ to Rs60.1bn. Demand for commercial ACs is healthy from healthcare and retail sectors while BLSTR continues to be No 1 or 2 player in ducted systems, VRF and chillers. It would take orders with focus on free cash flow. For exports, it is in process of developing specialized products for Europe and North America. EBIT margin will sustain at 6.5%-7% range.

Maintain ADD with revised target price of Rs900

We expect BLSTR to report revenue CAGR of 18% over FY23-26E, but earnings CAGR will be higher at 37% due to margin improvement and reducing tax rate (shift to new tax regime + Sri City tax benefits). We are optimistic about BLSTR’s growth prospects in RAC, commercial refrigeration as well as projects business. However, current valuation offers limited upside. Maintain ADD with revised target price of Rs900 on SOTP basis.

For More Centrum Broking Disclaimer https://www.centrumbroking.com/disclaimer/

SEBI Registration No.:- INZ000205331