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Weak summers to weigh on growth momentum

BLSTR reported a steady Q4FY25, with revenue growing ~21% YoY to Rs40.2bn (in line with our estimate), while EBITDA margin at ~7.0% (Emkay: ~7.7%) was mainly impacted by higher RM costs. BLSTR highlighted that April sales were muted (primary RAC sales up ~5% YoY) due to a weak start to summers and hence led to the mgmt. cutting its FY26 growth guidance to ~10-15% (from ~20-25%). Factoring in the fresh guidance, we cut our earnings estimates by ~13/14.6% for FY26/27. Nonetheless, we remain constructive on BLSTR’s long-term growth outlook, supported by continued market share gains (~14% in Q4) and ongoing backward integration efforts (MoU signed with Hindalco for copper tubes). Following the recent stock correction (down ~27%), valuations at ~50x 1YF PER near +1SD appear rich, although backed by a robust long-term growth narrative (refer to our IC: Cooling curve turning vertical). We retain BUY while cutting our TP by 14.6% to Rs2,050, implied at ~51x FY27E PER.

Q4: Weak start to Summer-2025 hurts growth momentum

BLSTR delivered ~21% YoY revenue growth (~Rs40bn), led by EMP and CAC (+31% YoY) and UP (+15% YoY/68% QoQ). Consol EBITDA grew ~16% YoY to ~Rs2.8bn, with margins down by ~50bps QoQ to ~7.0% (~70bps below Emkay estimate). UP EBIT margins expanded by ~12bps QoQ to ~8.4%, while EMP and CAC margins were up by ~15bps YoY to ~7.6% (flattish QoQ). Q4FY25 PAT rose to Rs1.9bn (Rs1.6bn in Q4FY24).

Earnings Call KTAs

i) The mgmt acknowledged that Apr-25 RAC demand fell short of expectations, on an underwhelming start to summers, sporadic rains (even in core markets like Mumbai), and elevated channel inventory levels (~1.5-2mn units higher than ideal). ii) BLSTR highlighted FY19/FY24 as reference points—while FY19 ended flattish despite a Q2 recovery, FY24 showed that even a weak Q1 can be offset by a strong Q3/Q4, keeping hopes alive for FY26 if summer demand revives. iii) BLSTR posted ~5% growth in Apr25, well below its internal target of ~25-30%. iv) The mgmt emphasized that short-term weather variability does not derail the structural demand story, driven by strong momentum in tier 3-5 towns. v) BLSTR has already undergone 2 rounds of price hikes (~3-4% in Jan-25; ~4-5% in Apr-25); on price cuts, it highlighted that given the weak summers, the current demand environment is not yet dire and price cuts are unlikely, unless summer conditions worsen. vi) BLSTR signed an MoU with Hindalco for local sourcing of copper tubes (earlier imported from Vietnam); domestic supplies are expected to replace imports from FY26. On compressors, localization is limited (sources from players like GMCC, Highly). vii) Developed products for 3 OEMs in US/Europe, following successful field trials. Enquiry levels remain strong—driven by expectations of an India–US trade agreement. viii) In EMP and CAC, order inflow remains strong from factories/data centers; these are high-margin projects given faster execution and equipment-heavy content. ix) FY26 guidance: Revenue: ~10-15% (~20-25% earlier); UP/EMPS EBITM: ~8.5/7.5%.

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