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    Blue Star

    BLUESTARCO
    Consumer Durables·30 Jan 2025
    Management Summary

    Blue Star delivered strong Q3 FY25 results, outperforming the market with robust revenue and operating profit growth, primarily driven by exceptional performance in the Room AC business. The company achieved a 14% market share in Room AC and expanded margins in the Unitary Products segment. While facing headwinds in Professional Electronics and certain supply chain aspects, management remains optimistic about future growth, banking on the upcoming summer season and strategic investments in capacity and R&D.

    Highlights

    7
    • Revenue from operations for Q3 FY25 grew by 25.3% YoY to ₹2,807.36 crores.

    • EBITDA for Q3 FY25 increased by 34.8% YoY to ₹209.38 crores, with EBITDA margin expanding to 7.5% from 6.9% in Q3 FY24.

    • Net profit for Q3 FY25 grew by 31.8% YoY to ₹132.46 crores.

    • The Unitary Products segment (Segment-II) reported revenue growth of 21.9% and a 100 basis points margin expansion.

    • Room AC market share improved to 14% in Q3 FY25, driven by strong festive season demand.

    • The carried-forward order book reached a record high of ₹6,801.99 crores as of December 31, 2024, representing a 12.8% YoY growth.

    • The company aims for a 15% market share in Room AC by FY25 and to maintain an 8.5% operating margin for the segment.

    What Changed2

    vs Q4 FY25

    Guidance items8 → 13 (+5)Risks discussed8 → 9 (+1)

    Key financials

    Single quarter

    08 metrics
    1. 01Revenue from Operations₹2,807.36 Cr+25.3%YoY
    2. 02EBITDA₹209.38 Cr+34.8%YoY
    3. 03EBITDA Margin7.5%
    4. 04PBT (before exceptional items)₹167.2 Cr+24.5%YoY
    5. 05Tax Expense₹46.53 Cr

    Segment breakdown

    • Segment-I: Electro-Mechanical Projects and Commercial Air Conditioning₹1,562.41 Cr55.7%
    • Segment-II: Unitary Products₹1,164.4 Cr41.5%
    • Segment-III: Professional Electronics and Industrial Systems₹80.6 Cr2.9%
    Donut· Share of Revenue

    Order Book

    high confidence

    Total Value

    ₹ 6,801.99 crores

    as of 2024-12-31

    quantified
    12.8% YoY

    Inflow this qtr

    ₹ 1,748.3 crores

    Composition

    Electro-Mechanical Projects(segment)
    ₹ 5,146 crores

    "The carried forward order book is at a record high, with good progress in order finalizations from factories and data center market segments."

    Source:
    Prepared remarks

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    ₹750 crores

    Debt

    Net ₹-102 crores

    Liquidity

    Cash ₹102 crores

    Guidance & targets

    13
    CategoryTargetPriority
    Market Share
    Room AC Penetration Level
    30%
    Medium
    Market Share
    Room AC Market Share
    15%
    High
    Profitability
    Segment-I Operating Margin
    7% to 7.5%
    High
    Profitability
    Segment-II Operating Margin
    8% to 8.5%
    High
    Profitability
    Room AC Operating Margin
    8.5%
    High
    Market Share & Profitability
    Overall AC Market Share & Margin
    15% market share, then 8.5% margin
    High
    Volume
    AC Industry Volume
    above 15 million units
    Medium
    Volume
    Blue Star AC Volume
    much higher than 1.5 million units
    Medium
    Revenue Growth
    AC Industry Revenue Growth (Summer Season)
    25%
    Medium
    PLI Benefits
    PLI Benefits Realization
    ₹75-80 crores
    High
    CAPEX
    Total CAPEX
    ₹750-800 crores
    High
    Capacity
    Sri City Plant Capacity
    600,000 units
    High
    Capacity
    Sri City Plant Scalable Capacity
    1.8-2.4 million units
    Medium

    What to watch in Q4 FY25

    5

    Commercial Refrigeration Business Performance

    Q4 FY25
    CurrentRegulatory issues behind, Q3 stabilized.
    TargetPromising Q4, strong market demand.

    Why it matters

    This segment faced setbacks and its revival is key for overall Segment-II performance.

    The regulatory issues faced in Water Coolers and Deep Freezers in the previous quarters are behind us and now we are focused on preparing for the forthcoming summer season. We are expecting the upcoming quarter to be promising one as market demand is likely to be strong.

    Risks & concerns

    9
    RiskSeverity

    Supply Chain Restrictions

    Ongoing supply chain restrictions, intensified post US elections, impacting Professional Electronics segment.Management acknowledged

    medium

    Raw Material Cost Escalation

    Escalation in raw material costs is a headwind, potentially impacting profitability.Management acknowledged

    medium

    Market Liquidity Crisis

    Liquidity crisis in the market is a headwind, and liquidity issues in certain market segments are delaying order finalizations for Commercial Air Conditioning.Management acknowledged

    medium

    Union Budget Uncertainty

    Uncertainty regarding the Union Budget's impact on the economy and CAPEX cycles.Management acknowledged

    medium

    Headwinds in Professional Electronics Segment

    Supply chain restrictions and muted domestic demand impacting revenue growth and profitability in Segment-III, with revival expected in FY26.Management acknowledged

    medium

    International Business Slowdown

    Slowdown in European market and uncertainty around U.S. trade policies may impact scaling up of international business.Management acknowledged

    medium

    Indian Rupee Depreciation

    Depreciation of Indian rupee is a headwind.Management acknowledged

    medium

    Competition and New Costs Impacting Margins

    Intense competition, along with new costs like e-waste compliance and consumer finance, keep operating margins in check despite scale benefits.Management acknowledged

    medium

    PLI-linked Capacities and Demand Volatility

    If demand is low, PLI-linked capacities across the industry could lead to inventory issues and margin pressure, which is 'part and parcel of the game'.Analyst acknowledged

    medium

    Q&A highlights

    8

    “The first part is, it is not due to prolonged summer, the summer had ended by July. It is demand that has been good during the festival season, commencing from Dussehra, Diwali, New Year, it continued. ... The key question is: how is the summer season going to be? You mentioned about winter and North India people are disappointed that the winter has gone, and they are feeling that it should have lasted for some more time. Usually, we pray that March first week onwards there is summer, and February onwards again stocking takes place.”

    Clarified that Q3 growth was demand-driven, not weather-driven, and highlighted the critical role of the upcoming summer season for Q4 performance, while noting healthy channel stocking.

    asked by Natasha Jain

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Q3 FY25 Performance Driven by Room AC

    Blue Star reported a robust Q3 FY25, with revenue from operations growing 25.3% YoY to ₹2,807.36 crores and operating profit increasing by approximately 35%. The Unitary Products segment, particularly Room AC, was the primary growth driver, achieving a 21.9% revenue increase and a 100 basis points margin expansion. The company's market share in Room AC improved to 14%, benefiting from strong festive season demand and proactive inventory management ahead of the summer season.

    02

    Segmental Performance Overview

    Segment-I (Electro-Mechanical Projects and Commercial Air Conditioning) saw revenue growth of 32.2% to ₹1,562.41 crores, with its carried-forward order book increasing by 10.7% to ₹5,146 crores. Segment-II (Unitary Products) recorded an 8.1% segment result margin, up from 7.1% YoY, primarily due to the strong Room AC performance. In contrast, Segment-III (Professional Electronics and Industrial Systems) experienced a 22.1% revenue de-growth to ₹80.6 crores, with its segment result margin contracting to 7.7% from 14.7% in Q3 FY24, due to headwinds in Med-Tech and Data Security businesses.

    03

    Strategic Investments and Future Preparedness

    The company continues its investments in research and development, digitalization, and manufacturing, ensuring future readiness. Capital employed increased to ₹2,763.4 crores as of December 31, 2024. Blue Star plans a CAPEX of ₹750-800 crores over the next three years for manufacturing, product development, and digitalization. The Sri City plant capacity is being scaled up from 300,000 to 600,000 units and can further expand to 1.8-2.4 million units as demand grows.

    04

    Market Share and Margin Outlook

    Blue Star aims to achieve a 15% market share in the Room AC segment by FY25 and maintain an operating margin of 8.5%. Management believes the AC market has significant penetration headroom, with a projected CAGR of 19% over the next five years. While scale benefits are expected to improve profitability, new costs related to consumer finance, warranty, e-waste compliance, and intense competition are expected to keep margins within the guided range of 7-7.5% for Segment-I and 8-8.5% for Segment-II.

    05

    Business Outlook and Macro Factors

    The company is optimistic about the forthcoming quarter, anticipating benefits from the summer season, potential revival in government spending, and accelerated private sector CAPEX. However, headwinds such as Indian rupee depreciation, commodity price escalations, and supply chain disruption🌐s persist. Management highlighted mitigation actions in place and is closely monitoring external factors like the Union Budget and global trade policies, which could influence future performance.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.