Result Update: Blue Star Ltd - ACCUMULATE - TP Rs.727 - Kotak

Blue Star (BSL) reported higher than expected revenue led by good performance by MEP as well as Unitary Cooling divisions. However, margins came in lower than expected due to enhanced spending on brand building and corporate expenses. These expenses were mainly in view of the recent product launches (Cooler and Water Purifier). This led to a miss in the reported profits. That apart, the company reported healthy order intake. It also reported improved working capital efficiency resulting robust cash generation. On a net basis, despite the profit miss, we believe that the performance was strong.

We have been bullish on Blue Star as we believe that the room AC sector offers potential for an extended period of high growth due to rising disposable incomes and under-penetration of product within the consumer durable basket. The stock has rallied strongly in the past three months and in view of this, we temper our bullishness on the stock and maintain "ACCUMULATE", thereby advising investors to buy the stock on declines. We revise our TP higher to Rs.727 (earlier Rs.555 based on 26x FY18E earnings).

Shares of BLUE STAR LTD. was last trading in BSE at Rs.675.75 as compared to the previous close of Rs. 687.7. The total number of shares traded during the day was 210176 in over 500 trades.

The stock hit an intraday high of Rs. 703.7 and intraday low of 670.7. The net turnover during the day was Rs. 142971411.

Source : Equity Bulls

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