Result Update: Blue Star Ltd - BUY - TP Rs.655 - Kotak

BSL exceeded our profit forecast marginally as strong profit growth in Central Air conditioning and packaged systems segment report offset weak demand conditions in the room AC market.

Key Highlights

- The revenue in Central Air conditioning and packaged systems segment is a function of the pace of execution and as per the Blue Star management, there has been a clear improvement on this front.

- The room AC market reported moderate growth of 8.5% in the quarter, but BSL managed to outperform industry growth and reported 14% y-o-y growth in revenue, thus enhancing its market share further to 12.5%.

- Order intake was healthy during the quarter at Rs 7.1 bn, up 23% y-o-y.

Valuation and Outlook

In terms of valuation, the stock is trading at 32x and 23x FY19 and FY20 earnings. We are moderating our target multiple for the UCP segment (from 30x earlier to 26x), post which our target stands reduced to Rs 655 (Rs 743 earlier). Despite this, there is adequate upside in the stock for us to upgrade the rating from "Accumulate" earlier to "BUY".

Shares of BLUE STAR LTD. was last trading in BSE at Rs.572.25 as compared to the previous close of Rs. 567.4. The total number of shares traded during the day was 758 in over 106 trades.

The stock hit an intraday high of Rs. 579 and intraday low of 569.5. The net turnover during the day was Rs. 435003.

Source : Equity Bulls

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