Blue Star — Q1 FY26 earnings call

Call held 7 Aug 2025

Management summary

Blue Star reported a softer Q1 FY26, primarily due to unseasonal rains impacting the Room Air Conditioning segment. Despite this headwind, the B2B segments (Electro-Mechanical Projects and Commercial Air Conditioning) demonstrated robust growth, with the overall order book reaching an all-time high. Management remains optimistic about demand revival during the festive season and expects full-year growth, while maintaining focus on profitability and strategic investments.

Highlights

  • Revenue from operations grew 4.1% to ₹2,982 crores in Q1 FY26.

  • EBITDA for Q1 FY26 was ₹199.99 crores, with a margin of 6.7%.

  • Net profit de-grew to ₹120.82 crores in Q1 FY26 from ₹168.76 crores in Q1 FY25.

  • Carried-forward order book increased 12.5% YoY to ₹6,843 crores as of June 30, 2025.

  • Segment-I (Electro-Mechanical Projects & Commercial AC) revenue grew 35.9% to ₹1,412.5 crores.

  • Segment-II (Unitary Products) revenue de-grew 13.3% to ₹1,499.4 crores.

  • Net cash position stood at ₹370.9 crores as of June 30, 2025.

Concerns

  • Unseasonal rains impacting summer season demand for Room Air Conditioners.

Key financials

  1. Revenue from Operations ₹2,982 Cr +4.1%YoY
  2. EBITDA ₹199.99 Cr
  3. EBITDA Margin 6.7%
  4. PBT ₹163.23 Cr -27.8%YoY
  5. Net Profit ₹120.82 Cr
  6. Capital Employed ₹2,821 Cr
  7. Net Cash Position ₹370.9 Cr

What they filed

Q1 FY27: revenue up 13.3%, net profit down 14.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,276 2,807 4,019 2,982 2,422 +6%2,925 +4%4,072 +1%3,378 +13%
EBITDA149 209 279 199 182 +22%220 +5%326 +17%175 −12%
Net profit96 132 194 121 99 +3%81 −39%227 +17%103 −15%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹2,982.3 Cr Total
  • Unitary Products (Segment-II) ₹1,499.4 Cr 50.3%
  • Electro-Mechanical Projects and Commercial Air Conditioning Systems (Segment-I) ₹1,412.5 Cr 47.4%
  • Professional Electronics and Industrial Systems (Segment-III) ₹70.4 Cr 2.4%

Order book

high confidence

Total value

₹6,843 Cr

as of 2025-06-30 quantified

12.5% YoY 9.3% QoQ

Inflow this quarter

₹1,963 Cr

Composition

  • Electro-Mechanical Projects (segment) ₹5,080 Cr 74.2%
Order book for B2B businesses is at an all-time high and continues to grow at double digits.

Source: Prepared remarks

Capital allocation

medium confidence
  • Liquidity Cash ₹370.9 Cr Company reported a net cash position of Rs. 370.9 cr as of June 30, 2025, compared to Rs. 1,042.9 cr as of June 30, 2024.
    The company reported a net cash position of Rs. 370.9 cr as of June 30, 2025 as compared to the net cash position of Rs. 1,042.9 cr as of June 30, 2024.

Guidance & targets

Room Air Conditioners Business

  • CAGR growth Room Air Conditioners Business · next five-year period · High confidence 19%
    But the long-term prospects for room air-conditioners business at a CAGR of 19% over the next five-year period should happen and we firmly believe in that.

    — B. Thiagarajan

  • Category size Room Air Conditioners Business · in five years · High confidence more than double
    But the preparation will be for simple reasons. In five years, this category should be more than double.

    — B. Thiagarajan

B2B Businesses

  • Revenue growth B2B Businesses · ongoing · High confidence double digits
    And fortunately, that part of the business is doing well. In fact, order book for the B2B businesses is at all-time high and we continue to grow at double digits.

    — B. Thiagarajan

Industry (Room AC)

  • Full year growth Industry (Room AC) · full year (FY26) · Medium confidence 10% to 15%
    I maintain that still full year this industry has got an opportunity to end the year with 10% to 15% growth.

    — B. Thiagarajan

Electro-Mechanical Projects (Segment-I)

  • Growth Electro-Mechanical Projects (Segment-I) · full financial year (FY26) · Medium confidence 15%
    As far as Segment-I is concerned, 15% growth is possible and 7% to 7.5% margin we will be able to maintain.

    — B. Thiagarajan

  • Margin Electro-Mechanical Projects (Segment-I) · full financial year (FY26) · Medium confidence 7% to 7.5%

    — B. Thiagarajan

Unitary Cooling Products (Segment-II)

  • Growth Unitary Cooling Products (Segment-II) · full financial year (FY26) · Medium confidence 10% to 15%
    Unitary Cooling Products, the growth should be 10% to 15%. That is the aspiration going by the past record of the industry.

    — B. Thiagarajan

  • Margin Unitary Cooling Products (Segment-II) · full financial year (FY26) · Medium confidence 8% to 8.5%
    For margin, our aspiration is 8% to 8.5%.

    — B. Thiagarajan

Unitary Products (Segment-II)

  • Margin Unitary Products (Segment-II) · full year (FY26) · Medium confidence 7% to 8%

    Previously 8% → 7% to 8%

    For Segment-II, we have been guiding that you should go by around 8% margin. And this year, of course, there will be a Quarter 1 impact. So, you can look at it at around 7% to 8%.

    — Nikhil Sohoni

What to watch in Q2 FY26

Room AC demand revival during festive season

Next quarter (Q2 FY26) and Q3 FY26
Current Early indications are good, but situation is volatile.
Target Strong demand leading to 10-15% full-year industry growth.

Why it matters

Crucial for Unitary Products segment recovery and achieving full-year growth targets after a soft Q1.

The early indications are it is good. But we do not know because the situation is changing every day. We have to wait and watch. So, therefore, that full year should be a double-digit growth is an expectation.

Risks & concerns

  • Unseasonal rains impacting summer season demand for Room Air Conditioners.

    high

    Unseasonal rains led to muted demand for Room AC, making it a 'disappointing summer'.

    Management acknowledged

  • Geo-political factors and U.S. trade negotiations impacting international business.

    medium

    Uncertainty due to geo-political factors and trade negotiations may delay ramp-up of international foray.

    Management acknowledged

  • Regulatory uncertainty in Med Tech business.

    medium

    Government temporarily stopping import of refurbished medical devices.

    Management acknowledged

  • Market volatility and broader economic conditions.

    medium

    The company operates in a 'volatile trade situation across the globe and in India' and acknowledges 'huge volatility in the market'.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
Inventory levels and initiatives to clear excess inventory, impact of new BEE norms. Direct
Second part, inventory is not an issue at all... it is just 30 days more inventory is there. That will move away.

Asked by Aniruddha Joshi

Compressor manufacturing JV plans. Evasive
I have not stated. No, I have not stated as we are looking for a JV partner... Right now, our supply chain is secured for about 12 months' time, in the sense that till end of next summer season we are covered.

Asked by Aniruddha Joshi

Market share gains in UCP segment despite industry decline and current market share. Direct
Coming back to your first question that is connected with the market share of 14%, it would have moved up, in my view, to 14.2% or something like that. Why we should have done well? We have been gaining market share.

Asked by Shivkumar Prajapati

Channel expansion strategy and geographical footprint (South vs non-South). Partial
So, the first is, the market share gain is not just due to distribution footprint expansion alone. It is having products at all price points that India is a vast country... All India market share may be 14. There are markets in which we will have 7% or 8%. There are markets in which we will have 10%. So, each of these markets, we internally call it as a surgical strike, go ahead, and work there in order to take the market share higher.

Asked by Natasha Jain

Growth expectations for Electro-Mechanical Project business and Unitary Product business for the full year. Direct
Electro-Mechanical Projects, that particular segment has got the EPC business of contracting... 15% growth is possible and 7% to 7.5% margin we will be able to maintain.

Asked by Akshen Thakkar

Volume decline for the industry in Q1 and impact on UCP segment margins. Direct
our understanding is, from various reports. There are institutional sales as well. My guess is that the industry de-growth would have been around 30%.

Asked by Achal Lohade

Early signs of demand revival for Room AC in the festive season and impact of pre-buying due to BEE norms. Direct
The early indications are it is good. But we do not know because the situation is changing every day. We have to wait and watch.

Asked by Keyur Pandya

Pricing discounts in the industry and by Blue Star. Direct
When we have only just one-month inventory, there is no reason for us to cut the prices. Normal schemes, whatever is the market operating prices, that will go on.

Asked by Anupam Goswami

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Blue Star reported a softer Q1 FY26 with revenue growing 4.1% to ₹2,982 crores, but net profit de-grew to ₹120.82 crores from ₹168.76 crores in Q1 FY25. EBITDA margin contracted to 6.7% from 8.3% in the prior year, primarily due to unseasonal rains impacting the Room Air Conditioning segment. Despite this, the company's B2B segments showed robust growth and the overall carried-forward order book reached ₹6,843 crores, a 12.5% increase year-on-year.

Room Air Conditioner Business Challenges & Outlook

The summer season was 'disappointing' due to unseasonal rains, leading to a 13.3% de-growth in the Unitary Products segment revenue to ₹1,499.4 crores. However, management estimates a slight market share improvement to above 14% and remains confident in the long-term CAGR of 19% for the next five years. They anticipate a demand revival during the festive season, with the industry expected to grow 10-15% for the full year, partly driven by pre-buying ahead of new energy label norms effective January 1st.

B2B Segment Strength

The Electro-Mechanical Projects and Commercial Air Conditioning Systems (Segment-I) demonstrated strong performance, with revenue growing 35.9% to ₹1,412.5 crores. The order book for this segment alone stood at ₹5,080 crores as of June 30, 2025, up from ₹4,557 crores last year. Key demand drivers included manufacturing, data center, and healthcare segments, with the company aiming for 15% growth and 7-7.5% margin for this segment for the full year.

Inventory Management & Market Share

Management clarified that inventory is 'not an issue at all,' with only about 30 days of excess inventory, which is expected to clear. They stated that Blue Star has marginally outperformed the industry in the Room AC segment, with market share improving to around 14.2%. This gain is attributed to a comprehensive strategy including products at every price point and expanded distribution in Tier 3, 4, 5 cities, particularly in regions where market share was historically lower.

Segment-wise Performance

The Unitary Products segment (Segment-II) saw a revenue de-growth of 13.3% and a margin contraction to 5.8% due to lower volumes and operating leverage impact. The Professional Electronics and Industrial Systems segment (Segment-III) also de-grew by 27.3% to ₹70.4 crores, primarily due to challenges in Med Tech and Data Security, though its margin improved to 10.8% due to a favorable product and service mix. Commercial Refrigeration, a part of Segment-II, witnessed strong growth driven by processed food and pharmaceutical segments.

Capital Allocation & Strategic Investments

The company continues to invest in manufacturing capacity, research and development (R&D), and digitalization, with R&D spending around 1.5% of revenue. As of June 30, 2025, the company maintained a net cash position of ₹370.9 crores, down from ₹1,042.9 crores a year ago, reflecting ongoing investments. Management emphasized a commitment to strategic investments for long-term growth and innovation while ensuring sustainable value creation.

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