Dolat Capital recommended reduce rating on Blue Star with a target price of Rs 510 in its research report dated August 07, 2020.
Dolat Capital's research report on Blue Star
Q1 was a hard quarter for Blue Star with revenues down 60% yoy, driven by a dip of 70% in the unitary cooling business at Rs2.7bn which was impacted by lost summer season. The project business was down 50%, impacted due to sites not operating at full capacity which has led to a loss, with EBIT level losses in both the segments (Refer Exhibit 6). Both the businesses are showing improvement as the economy opens up hand is expected to normalize by Q4FY21, which is the next big quarter for the RAC industry.
We trim estimates to factor in the Q1 numbers (Exhibit 2) and expect them to reach FY19 levels again by FY22. We retain our Reduce, with a TP of Rs510 valuing stock at a PER of 24x for FY22E.
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