Result Update: Blue Star Ltd - ACCUMULATE - TP Rs.743 - Kotak

BSL exceeded our profit forecast despite weak demand conditions in the room AC market. Enhanced margins were attained through savings in project procurement costs and a better margin profile of projects.

Key Highlights

- Although, BSL reported revenues of Rs 13.8 bn in Q1FY19, down 4% on a yoy basis, on a like to like basis (adjusted for GST implementation), the revenue growth was up 4% y-o-y.

- Segment margins expanded in both the divisions. Order book is up 8% to Rs 21.2 bn.

- The management is witnessing evidence of demand revival in the corporate, institutional and industrial sectors. Even consumer spending continues to be robust. The management expects the forthcoming festival season to be good for the Cooling Products Segment. Also, outlook on order finalisation in Electro-Mechanical Projects and the Professional Electronics & Industrial Systems businesses is looking healthy, the management opined.

Valuation and Outlook

- In view of the earnings revision, our target price works out to 759 (Rs 837 earlier). Given marginal upside from current levels, we recommend "Reduce". In terms of valuation, the stock is trading at 40x and 29x FY19 and FY20 earnings, which is at a premium to sector leader - Voltas.

Shares of BLUE STAR LTD. was last trading in BSE at Rs.695.25 as compared to the previous close of Rs. 703.85. The total number of shares traded during the day was 2886 in over 230 trades.

The stock hit an intraday high of Rs. 709 and intraday low of 695.1. The net turnover during the day was Rs. 2023590.

Source : Equity Bulls

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