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Result Synopsis

BLSTR delivered inline revenue growth with EMPS delivering robust 32.6% growth, while unitary products business saw muted growth of 5.1%. PEIS segment has declined by 3.8% yoy. Muted revenue growth is attributed to challenges in the commercial refrigeration business arising from regulatory changes related to BIS and Quality Control Order (QCO) as well as delays in ramping up production of the new range of glass top deep freezers. RAC continued its growth momentum with BLSTR maintaining its market share of 13.75%. The company expects to end FY25 at 14% share vs earlier targeted share of 15%. EMPS on the other hand continues to surprise positively both on execution as well as margin front. Order inflow for the quarter stood at Rs19.4bn growth of 12%, while order book stood at Rs65.9bn growing by 10%. The company is witnessing improved traction from the real estate space. We continue to remain positive on the domestic business, as its company has growth drivers in place with strong proposition in the commercial refrigeration and air-conditioning space, while on the exports front to USA BLSTR has received additional quantities to be supplied, however company expects stiff competition from the Japanese, Chinese and Korean players. We continue to maintain our Reduce rating as positivity of the domestic market has been captured in the current valuation, while international business would take time for ramping up as BLSTR is currently focusing on increasing its capability and it will take time to make significant inroads as China is still cost competitive given their scale of operations.

BLSTR is estimated to deliver strong double-digit CAGR revenue growth on back of strong execution of projects, market share gains in RAC and continued growth momentum in Commercial refrigeration. We pencil in revenue/EBITDA/Adj PAT CAGR of 19%/23%/30% over FY24-27E. We have increased our SoTP-based PT to Rs1,749 vs earlier Rs1,492 rolling forward our estimates to FY27. We have maintained our target multiple for EMPS business to 35x as company has been consistently delivering on revenue improving margin profile.

Result Highlights

* Business update - Bluestar (BLSTR IN) reported inline revenue growth, with Unitary products/EMPS growing at 5.1%/32.6% respectively, while PEIS has registered decline of 3.8%. Muted growth in unitary products was one-time challenge in commercial refrigeration arising from regulatory changes related to BIS and Quality Control Order (QCO)

* Margins – Gross margins have expanded by 167bps on yoy basis. EBITDA margins expanded by 7bps on yoy basis.

* EMPS – Order-book at Rs65.9bn continues to remain healthy. Order inflow at ~Rs19bn was up 12% on yoy basis. Order finalization in commercial real-estate sector has resulted in inflow growth.

* Demand Outlook – The company expects strong growth momentum in RAC and commercial air-conditioners to continue in FY25, while impact of regulatory changes in commercial refrigeration is expected to be temporary.

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