Blue star Ltd - Q4FY21 Result Update - YES Securities

Inline performance; valuation remains elevated

Result Highlights

- Quarter summary - Blue star (BLSTR) delivered revenue growth of 24% yoy with Unitary products and EMPS and packaged air-conditioner registering growth of 31% and 18% respectively. Increased commodity prices have led to 358bps yoy contraction in gross margin. EBITDA growth stood at 173% yoy on cost control initiatives.

- Growth across products - Commercial air-conditioning registered 19% growth, while RAC a key segment registered growth of 33% higher than market growth of 27%. Other products such water purifiers and air coolers have done well during the quarter.

- Commodity inflation impact - Gross margins contracted sharply by 358bps to 21.9% lowest in past many quarters on rising prices of key commodities like Steel, Copper, Aluminum and Plastics.

- Market share trends - BLSTR continues to grow faster than the market and gain market share. BLSTR's market shar in RAC now stands at 13.25% up by 75bps. In water purifier BLSTR commands market share of 3%.

Valuation and view - 4Q saw broad based growth across the segments. RAC business delivered market leading growth resulting in market share growth for the company. EMPS segment saw improved execution, while selective execution of better margin orders resulted in improved margins. Gross margins were impacted on rising commodity prices; however, company has taken another round of price increase to the tune of 3-5% across SKU's from 1st April to offset increased commodity prices. Near term growth momentum continues to pose challenge on account of lockdown/restriction across various parts of the country, we believe BLSTR to return to normalized growth by 2HFY22 on easing of lockdowns/restriction as it has taken several initiatives like launching new RAC models in mass premium range, executing projects in risk adjusted manner and increasing its presence on e-commerce.

BLSTR is estimated to deliver double digit CAGR revenue growth on back of improved execution of projects, market share gains in RAC, continued growth momentum in packaged air-conditioners and commercial refrigeration. Profitability is set to improve on cost control initiatives and reduction in working capital requirements. We now pencil in Revenue/EBITDA/PAT CAGR of 21%/39%/66% over FY21-23E. We have SoTP based PT of Rs800 assigning 40x to unitary products and maintain reduce rating on high valuations.

Shares of BLUE STAR LTD. was last trading in BSE at Rs.840.85 as compared to the previous close of Rs. 828.5. The total number of shares traded during the day was 13117 in over 974 trades.

The stock hit an intraday high of Rs. 870 and intraday low of 834.2. The net turnover during the day was Rs. 11140293.

Source : Equity Bulls

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