Neutral Blue Star; target of Rs 1950: Motilal Oswal

Motilal Oswal's research report on Blue Star

Leading player in commercial refrigeration with steady market share gainsin RAC: Blue Star (BLSTR) is steadily gaining market share in the Indian RAC segment. Its share improved to ~14% in FY25 from ~7% in FY14. The company is now targeting ~15% share by FY27E. BLSTR retains a strong leadership position in the commercial refrigeration business, holding over 31% share in deep freezers and modular cold rooms. We estimate that its unitary cooling product (UCP) revenue would decline ~3% YoY in FY26, primarily due to a weak summer season. However, we project revenue growth of ~19%/18% YoY in FY27/FY28, fueled by a recovery in demand. We estimate that the EBIT margin will be in high-single digits and gradually improve as BLSTR achieves a higher scale of operations and increasesindigenization. Leading integrated MEP service provider shifting focus to high-value segments; retains leadership in CAC: BLSTR is a leading integrated MEP (Mechanical, Electrical and Plumbing) service provider with eight decades of experience in providing solutions to the infrastructure, building, and industrial domains.

Outlook

Initiate coverage with a Neutral rating: We initiate coverage on the stock with a Neutral rating and an SoTP-based TP of INR1,950 (valued at 50x Dec’27E EPS for UCP, 40x Dec’27E EPS for MEP & CAC, and 25x Dec’27E EPS for PEIS).