Accumulate Blue Star; target of Rs 1783: Prabhudas Lilladher

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Blue Star's RAC demand remains healthy, with management expecting approximately 25% industry growth in FY27, driven by an extended summer and festive-season stocking.
  • Data centre MEP business is a key growth driver, with management indicating potential order bookings of INR 40bn in FY27 and a revenue opportunity of INR 20bn currently.
  • Unitary Products EBIT margin is expected to be over 6.5% in FY27, depending on pre-summer sales and successful cost pass-through.
  • Commercial refrigeration is showing early signs of recovery, although management expects only single-digit growth in FY27 due to subdued end-market demand and significant pricing requirements.

Thesis Validation Checklist

  • Investors should watch for RAC industry growth, data centre order bookings, and Unitary Products EBIT margin recovery over the next 12 months to validate the thesis.
  • Key risks include aggressive industry competition, elevated input costs, and project execution delays.
  • Management's ability to restore profitability through calibrated price hikes, product portfolio rationalization, and cost optimization will be crucial.
  • The company's focus on prioritizing profitability and operating cash flows over market share in the EMP segment will also be important to monitor.