Blue Star Ltd - PINC Result Review

Blue Star Ltd's (BSL) Q1FY11 net sales were better than our expectation as it increased by 24.6% YoY to Rs6.6bn against our estimate of Rs6.2bn. OPM contracted by 329bps to 8.5% on account of higher input cost and change in product mix. Lower operating margins coupled with higher effective tax rate (29.2% against 24.2% YoY) led net profit to de-grew by 9.8% to Rs372mn lower than our estimate of Rs449mn.

VALUATIONS AND RECOMMENDATION

We maintain our earning estimates and roll-forward our valuations to FY12 earnings. At the CMP of Rs435, the stock trades at a P/E of 17.2 & 14.7x and an EV/EBITDA of 10.9 & 9.2x of FY11E & FY12E earnings respectively. We are positive on the stock with improvement in domestic scenario, however, with current valuations, we maintain our 'HOLD' recommendation with a target price of Rs445 (15.0x FY12 EPS).

Source : Equity Bulls

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