Blue Star - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, Blue Star reported a 12.5% yoy decline in its revenue to Rs.801cr. OPM for the quarter fell by 1,734bp yoy and 560bp qoq to negative 6.1% due to higher other expenditure. PAT declined by 180% yoy to negative Rs.45cr. According to management, the current scenario is going to continue for the next two to three quarters owing to cost overruns. Thus, we continue to maintain our Neutral recommendation on the stock.

Top line declines, margin dips significantly: Blue Star reported a 12.5% yoy decline in its top line to Rs.801cr in 4QFY2012 on a standalone basis. The decline in the company's revenue was on account of a 20.3% yoy decline in the electromechanical projects and packaged air conditioning systems (EMPPACS) segment to Rs.463cr, which accounted for nearly 57% of the company's total revenue. The segment also reported EBIT loss of Rs.58cr in 4QFY2012 vs. profit of Rs.70cr in 4QFY2011 on account of cost overruns of Rs.40cr and write-off worth Rs.20cr, which had a negative impact on margins. Owing to losses in this segment, overall OPM declined by 1,734bp yoy to negative 6.1%. PAT came in at negative Rs.45cr during the quarter.

Outlook and valuation: Demand from market segments has still not picked up. However, growth in the cooling products segment remains strong. Overall, management is not very optimistic and expects the current scenario to continue over the next two to three quarters. Management also expects a 5-6% yoy margin contraction in FY2013. We have revised our estimates downwards and continue to maintain our Neutral stance on the stock.

Source : Equity Bulls

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