Angel Broking neutral on Blue Star
Angel Broking has recommend a Neutral rating on Blue Star stock in its research report dated November 3, 2015
November 05, 2015 / 15:27 IST
Angel Broking's research report on Blue Star Blue Star reported an in-line set of numbers for 2QFY2016, posting an 11.6% yoy increase in top-line to `717cr. On the operational front, net raw material cost as a percentage of sales increased by 330bp yoy to 70.2%. However, this was offset by a 102bp yoy and 199bp yoy decline in Employee and Other expenses to 8.9% and 17.1% of sales, respectively. The EBITDA margin for the quarter declined by 28bp yoy to 3.8%. On account of higher depreciation and after adjusting for exceptional items (VRS related expenses of `13cr), the net profit declined by 24.3% yoy to `7cr. Outlook and valuation: We expect Blue Star to report a CAGR of 14.3% in its revenue over FY2015-17E to `4,157cr. The EBITDA margin is expected to expand by 256bp over FY2015-17E to 6.0% due to better margin orders. Consequently, the net profit is expected to be at `130cr in FY2017E as compared to an adjusted net profit of `42cr in FY2015. At the current market price, the stock is trading at EV/sales of 0.9x for FY2017E and 26.3x its FY2017 earnings. We have not accounted for the merger of Blue Star Infotech into the company as the same is subject to respective shareholders’ and High Court’s approval and as we await more information about the deal from the company. Currently we have a Neutral rating on the stock.For all recommendations, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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