Buy Blue Star; target of Rs 1850: Emkay Global Financial

Emkay Global Financial is bullish on Blue Star has recommended buy rating on the stock with a target price of Rs 1850 in its research report dated July 02, 2025.

Broker Research

July 03, 2025 / 11:35 IST

buy

Emkay Global Financial' research report on Blue Star

We met with the management of Blue Star (BLSTR) to understand recent trends in the AC industry and mgmt outlook for FY26. KTAs:1) BLSTR expects ~20- 25% YoY revenue drop in RAC in Q1FY26 due to a high base and unseasonal rains, partly offset by steady growth in CACs (~10-12%, led by data centers) and Commercial Refrigeration (~15-20%, led by visi coolers/freezers). 2) Q2 is likely to see a slower offtake due to elevated channel inventory owing to muted AC demand/weak secondary sales in Q1. 3) RAC demand could rebound in H2FY26, aided by festive season momentum and BEE star-rating change-led pre-buying. 4) The mgmt has guided to RAC growth of ~10-15% for FY26 with UP EBITM at ~8-8.5% (skewed toward the lower end) led by cost discipline and operational efficiency measures. 5) BEE rating change in Jan-26 could lead to an expected cost hike of ~7–8% across players.

Outlook

Our 15Y trend analysis shows weather-led demand volatility is cyclical, with weak summers typically followed by sharp rebound in both, volume and stock prices (refer to our note: Untimely rain: Killjoy for AC demand, apt time to BUY AC stocks). We keep our estimates largely unchanged and introduce FY28 estimates; retain BUY with unchanged TP of Rs1,850, based on UP/EMP&CAC/PEIS Jun-27E PER of ~60/45/15x.

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