Buy Blue Star; target of Rs 775: KRChoksey

KRChoksey's research report onBlue Star

Blue Star Ltd. reported Q4FY18 revenue of INR 14.7 Bn (+7.8% YoY) which was below our estimates. As against our estimates the performance of the Unitary Products segment was unsatisfactory on YoY basis with a mid-single digit growth. Electro-Mechanical Projects & Packaged AC segment grew by 6.7% YoY, while Unitary Products and Professional Electronics and Industrial segments grew by 7% and 2.7% respectively.

Outlook

With a growing order book and new product launches the demand for consumer products is increasing despite of some macroeconomic hurdles like demonetization and GST, we anticipate top line and PAT to grow by around 8-10% and 20-22% YoY on a consolidated basis respectively. Currently, the stock is trading at P/E of 28.1x FY20E, we assign a P/E multiple of 32.5x and maintain a “BUY” rating on the stock with a target price of INR 775 representing an upside of 15.6%.

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