Blue Star ~ Leading player in RAC & Commercial Refrigeration (Market Leader)

[Lajja_Shah]

Bluedart an idea given targets a growth of 25% in summer and around 30% revenue growth in March-June 2023. Targets 15% market share.

Source: Management Interview CNBC TV 18.

[royatirek]

A lot of mutual funds increased their stakes in the Bluestar last month by more than 50 percent.

Therefore I took a look into Edelweiss research report on management meet. Everything looks positive
but CFO not increasing and debt not going down is confusing me :

1. They have been gaining market share since few years.
   

   

2. Revenue contribution from Unitary Products is increasing since many years and now stands at 43. I am guessing that unitary products has better cash conversion cycle and hence there cash flow should be increasing since last many years but it is not visible.
   

   
   
   
   

3. They have become conscious before bidding for the government project(known for reducing CFO and increasing cash conversion cycle) but still there CFO is not increasing and their debt is still increasing.

Disclosure : Not invested

[Raj7800]

Superb numbers from bluestar
24% YOY quarterly revenue growth
45% YOY Ebitda growth
UCP segment growth - 35% YOY

I think AC as a category is an outlier among other consumer durables and home appliances segment in terms of growth and with now industry coming out of 2-3 years of low growth led by delayed summer/high competitve intensity, AC as a category should be an outlier among other segments

[rahsh]

Interesting pic from Blue star AR2024 as rival Voltas is Tata company… !

[Avigyan_Mitra]

India’s AC market is HOT! Blazing summers & rising incomes = AC gold rush. Overtaking China by 2045? Ambitious, but not impossible. This could be a game-changer for the industry.

Supply chain woes continue to plague the AC industry. Copper & compressors are the main culprits. Domestic production is slowly improving but still heavily reliant on imports. Expect prices to stay high for a while.

New chillers for data centers & brine chillers mean they’re aiming for bigger fish in the market. Smart move to diversify & tap into growing sectors.

[Jitendra_Vyas]

Any internal news in the market? Even with good results, stock is struggling to go up.

[Jitendra_Vyas]

Blue Star Limited Q2 and H1 FY25 Earnings Conference Call Summary for Investors

This summary focuses on key takeaways from Blue Star Limited’s Q2 and H1 FY25 earnings conference call, particularly for investors considering a long-term investment in the company.

Overall Performance and Outlook

• Blue Star delivered a strong Q2 with revenue growth exceeding 20%, operating profit growth around 22%, and net profit increasing by over 36%. [1] This robust performance is attributed to strong demand across key segments and a substantial order book. [2]
• The company remains optimistic about FY25, projecting it to be another landmark year. [3, 4] They expect to achieve top-line growth between 25% and 30% in the unitary products segment, particularly in room air conditioners. [5]
• Blue Star maintains its margin guidance, aiming for around 7.5% in Segment 1 and 8.5% in Segment 2. [6]
• The management acknowledges uncertainties in the global economic environment but is hopeful that the slowdown in other industries won’t negatively impact the air conditioning sector. [7]

Segment Performance

• Segment 1 (Electromechanical Projects and Commercial Air Conditioning) witnessed 32.6% revenue growth, driven by strong performance in commercial air conditioning products and services. [8, 9] Manufacturing and data centers are also contributing significantly to this segment’s growth. [9, 10]
• Segment 2 (Unitary Products) experienced a 5.1% revenue growth, primarily driven by the room air conditioner (RAC) business. [11] The commercial refrigeration business faced challenges due to regulatory changes but is expected to recover in subsequent quarters. [5, 12]
• Segment 3 (Professional Electronics and Industrial Systems) recorded a modest 3.8% revenue growth. [13] The management anticipates growth to revive in Q4 FY25. [14]

Key Drivers and Challenges

• The RAC business is performing exceptionally well, benefiting from increasing demand, stable prices, and growing consumer finance options. [15, 16] Blue Star is focused on expanding its distribution network, investing in R&D and innovation, and optimizing its supply chain. [2]
• The commercial refrigeration business was negatively impacted by regulatory changes related to water coolers and the delayed ramp-up of new deep freezers. [12] However, the company expects these challenges to be resolved soon, with normalization expected from Q3 FY25 onwards. [17]
• Blue Star is actively investing in new product development, particularly in energy-efficient and decarbonization solutions for international markets like Europe and North America. [18, 19] However, the company is cautious about the slowdown in Europe and uncertainties surrounding the US market. [19]

Financial Position

• Blue Star has a strong financial position with a net cash position of rupees 18,526 crores as of September 30, 2024. [8]
• Working capital requirements have increased due to investments in components to ensure a robust supply chain for the upcoming summer season. [20, 21]
• The company is continuing its investments in R&D, manufacturing capacity expansion, and digitalization. [8, 22]

Investor Considerations

• Blue Star’s strong performance, positive outlook, and focus on growth segments like RAC and commercial air conditioning make it an attractive investment opportunity.
• The company’s commitment to R&D and new product development positions it well for future growth.
• Investors should be mindful of the potential impact of external factors like global economic slowdown and regulatory changes.
• Further clarity on segment reporting, particularly separating commercial air conditioning from other segments, would enhance transparency and aid investor analysis.

This summary provides an overview of Blue Star Limited’s performance and future prospects. Investors should conduct their own due diligence and consider all relevant factors before making any investment decisions.

Blue Star Earnings Call for Q2FY25

[Abhishek_Burnwal]

Thanks a lot for the summary. I see one discrepancy here though.

You mentioned The RAC business is performing exceptionally well but then you also wrote that the revenue growth in this segment is only 5%.

Can you please explain this?

[Jagadish_Gowda]

There was a filing to BSE with regards to dispute between the Company and WJT. The filing is about alleged claims brought by WJT.
WJT has put a case in the Dubai court against Blue Start and asking for a claim. But now, it has increased the claim amount from 223 Cr Rs to 460 Cr Rs from the company.
Looks like Company had a joint venture in Oman with WJT as Blue Star Oman Electro Mechanical Company in 2015. The details are mentioned in the below link:

a88cd05d-668c-4f39-a831-735453873496.pdf

Not able to know the full details of the reason. Can someone throw more light into this?