Blue Star — Q4 FY25 earnings call

Call held 8 May 2025

Management summary

Blue Star delivered strong financial performance in FY25, with significant revenue and profit growth driven by robust demand in its core segments. Despite a challenging start to the summer season in April, the company maintained growth and is focused on market share expansion and strategic investments in R&D and localization. The order book remains healthy, providing good visibility for future growth.

Highlights

  • Consolidated revenue for FY25 crossed Rs. 12,000 crores, reaching Rs. 11,976.7 crores, a 23.6% YoY growth.

  • Net profit before exceptional items for FY25 grew 38.6% YoY to Rs. 772.4 crores.

  • FY25 EBITDA margin improved by 40 bps to 7.3% from 6.9% in FY24.

  • Q4 FY25 revenue from operations grew 20.8% YoY to Rs. 4,018.96 crores.

  • Carried forward order book increased 9.9% YoY to Rs. 6,263.4 crores as of March 31, 2025.

  • Room AC business achieved 1.53 million units in sales volume for FY25, with market share close to 14%.

  • A dividend of Rs. 9 per share was recommended for FY25, up from Rs. 7 per share in FY24.

Concerns

  • Weather Volatility and Impact on RAC Demand

Key financials

  1. Revenue from Operations ₹11,976.7 Cr +23.6%YoY
  2. EBITDA (excl. other income) ₹875.9 Cr +31.7%YoY
  3. EBITDA Margin 7.3% +0.4%YoY
  4. PBT (before exceptional items) ₹772.4 Cr +38.6%YoY
  5. Net Profit ₹591.2 Cr +42.7%YoY
  6. Net Profit Margin 4.9%

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 (FY25)
₹11,967.7 Cr Total
  • Electro-Mechanical Projects and Commercial Air Conditioning Systems ₹5,998 Cr 50.1%
  • Unitary Products ₹5,621.1 Cr 47.0%
  • Professional Electronics and Industrial Systems ₹348.6 Cr 2.9%

Order book

high confidence

Total value

₹6,263.4 Cr

as of 2025-03-31 quantified

9.9% YoY

Inflow this quarter

₹1,439.9 Cr

The carried forward order book reached its highest-ever level, reflecting operational rigor and efficiency, and providing a strong pipeline for growth.

Source: Prepared remarks

Capital allocation

high confidence
  • Dividend ₹9/share (final)
    In view of the record revenue and profits earned by the company, a dividend of Rs. 9 per share, previous year Rs. 7 per share, is recommended by the Board of Directors of the company.
  • Liquidity Cash ₹640.35 Cr The company reported a net cash position of Rs. 640.35 Cr as of March 31, 2025, compared to Rs. 455.9 Cr as of March 31, 2024.
    The company reported a net cash position of Rs. 640.35 Cr as of March 31, 2025, as compared to a net cash position of Rs. 455.9 Cr as of March 31, 2024.

Guidance & targets

Market Share

  • Room AC Market Share Market Share · quickly · High confidence 15%
    Our goal, we have stated that we would like to see that 15% market share quickly and so on, and distribution, branding, everything will be happening that way.

    — B. Thiagarajan

Revenue

  • Overall Revenue Growth Revenue · FY26 · Medium confidence 10% to 15%

    Previously 25% to 30% (internal target for April) → 10% to 15%

    As we sit and see now with a muted April, I would down it to say 10% to 15% growth, and if extremely lucky, it will be 20% growth, because one-month has gone, another seven days have gone.

    — B. Thiagarajan

Margin

  • Segment-I Margin Margin · FY26 · High confidence 7.5%
    The guidance for FY26, unless and until something dramatically changes remain, for Segment-I, 7.5%; and Segment-II, 8.5%. And we will attempt to take it to 9%, and that will be with a great difficulty, I think.

    — B. Thiagarajan

  • Segment-II Margin Margin · FY26 · High confidence 8.5%

    — B. Thiagarajan

CAGR

  • Room Air Conditioner CAGR CAGR · 2025-2030 · High confidence 19%
    between now and 2030, the CAGR estimate is 19%.

    — B. Thiagarajan

  • Commercial Air Conditioning CAGR CAGR · High confidence 12% to 12.5%
    Our estimate is that it should grow at a CAGR of somewhere between 12% to 12.5%.

    — B. Thiagarajan

Growth Potential

  • Commercial Refrigeration Growth Growth Potential · High confidence 30%
    It has a potential to grow at 30%, because India is underpenetrated.

    — B. Thiagarajan

R&D Spend

  • R&D Investment as % of Revenue R&D Spend · ongoing · High confidence 1.5% to 2%
    1.5% to 2% of our revenue will be invested in R&D. It will keep on happening.

    — B. Thiagarajan

What to watch in Q1 FY26

RAC Industry Growth and Blue Star's Performance

Next quarter (Q1 FY26)
Current Industry degrew 15-20% in April; Blue Star grew 5% in primary sales
Target Recovery and growth in May/June, aligning with FY26 targets

Why it matters

RAC is a major segment, and April's performance was below expectations; recovery is crucial for achieving full-year targets.

April, I understand, the industry would have degrown anywhere between 15% to 20%. In our case, as I can disclose this since the Board Meeting is over, we would have grown by around 5%.

Risks & concerns

  • Weather Volatility and Impact on RAC Demand

    high

    Unpredictable weather patterns, including sporadic rains in April, led to industry degrowth and uncertainty for the summer season.

    Management acknowledged

  • Commercial Refrigeration Regulatory Changes

    medium

    Regulatory changes impacted the Commercial Refrigeration business in H1 FY25, though it has since recovered.

    Management acknowledged

  • E-Waste Extended Producer Responsibility (EPR) Cost Increase

    medium

    Increased EPR rates are being contested by companies, including Blue Star, with provisions made for the additional cost.

    Management acknowledged

  • High Channel Inventory in RAC Segment

    medium

    Significant quantities of material were lifted in March, leading to higher-than-normal inventory in the market, contributing to April's degrowth.

    Management acknowledged

  • Geopolitical Developments and Supply Chain Disruptions

    medium

    Potential volatility in commodity prices and supply chain disruptions due to global geopolitical events.

    Management acknowledged

  • Uncertainty in International Exports Landscape

    medium

    Global trade policies (e.g., US-India, US-China deals) create uncertainty for export growth despite product approvals and inquiries.

    Management acknowledged

  • Cost of Market Penetration and Competition

    medium

    Penetrating Tier-3, 4, and 5 towns requires investments in brand, distribution, in-shop demonstrators, and consumer finance, leading to intense competition.

    Management acknowledged

  • Copper Duty and FTA-related Disputes

    low

    Issues related to copper duty under FTA and localization, though Blue Star has made provisions and is sourcing locally.

    Management acknowledged

Q&A highlights

6 direct
RAC Inventory and Pricing Strategy Partial
I am of the view that energy label change will not be an issue at all, for the simple reason, the production of those products would not have commenced and raw materials would have been ordered only for the summer season, finished good inventory when we will, in case the summer fails, I am still hopeful something will happen in May and June...

Addressed concerns about high channel inventory and potential pricing pressure due to a weak April and upcoming regulatory changes, with management expressing confidence in correction.

Asked by Natasha Jain

R&D Spend on Commercial AC and Margin Impact Direct
clear guideline is that whether it is room air conditioner or a deep freezer or it is a commercial air conditioning system, 1.5% to 2% of our revenue will be invested in R&D. It will keep on happening.

Clarified the company's consistent R&D investment strategy across segments and its impact on margins, emphasizing it's for competitiveness and sustainability.

Asked by Natasha Jain

Quantification of EPR Provision Direct
As far as Blue Star exact figure, do not worry, it is in the order of Rs. 10 Cr, which will go up to Rs. 30 Cr in the coming year. Last year, midway through it came in, so the differential has been provided for.

Provided specific figures for the E-Waste Extended Producer Responsibility provision and its expected increase, highlighting the financial impact.

Asked by Naushad Chaudhary

MEP Segment Margin Differences Direct
generally, the projects in which the equipment content is higher will, obviously, have a higher margin. The projects in which it's all 12 to 18 months kind of completion will have higher margin. Projects in which you have price variation clause that is built in, will have higher margin.

Explained the factors contributing to varying margins within the Electro-Mechanical Projects segment, specifically highlighting higher margins for projects with higher equipment content and longer completion times like data centers.

Asked by Dhruv Jain

International Exports Progress and Uncertainty Partial
the situation remains the same that we have three customers and we have got products approved for them. These are in the decarbonization area, and they have started lifting the material. As one would like to scale, you know from January what is happening, and the complete uncertain situation prevails.

Addressed the status of international exports, noting product approvals and inquiries but acknowledging significant uncertainty due to global geopolitical and trade policy issues.

Asked by Dhruv Jain

Commercial Refrigeration Market Share Direct
Yes, Commercial Refrigeration, if you take deep freezers, which are chest freezers, many types, whether it is glass top, hard top, and the water cooler, or the negative temperature storage, all these put together, we will be having close to 31% market share there. We would like to maintain, if possible, improve. But that market is significantly growing.

Quantified Blue Star's market leadership in key Commercial Refrigeration sub-segments, indicating strong competitive positioning in a growing market.

Asked by Aniruddha Joshi

April Sales Decline and Primary vs Secondary Sales Direct
I do not know the market data; we have to wait and see for the GFK report whenever it is published for the month of April. In our case, primary sales as well as secondary sales are up by a marginal 5%.

Clarified that while the industry saw a significant decline in April, Blue Star managed a 5% growth in primary sales, suggesting channel stocking due to anticipated compressor shortages.

Asked by Aditya Bhartia

Impact of Muted Demand on Pricing Actions Direct
Now when the demand comes down, so what happens is that you end up introducing some schemes. We are not there yet. In other words, there is no desperation. If the demand itself is not there and you are taking some 2%, 3% price lower for the sake of getting volumes, we will rather manage the inventory than trying to play with the prices.

Explained the company's approach to pricing in a muted demand scenario, prioritizing inventory management over aggressive price cuts, but acknowledging potential for schemes to maintain market share.

Asked by Sonali Salgaonkar

2 min read 6 chapters

Detailed narrative

Strong Financial Performance in FY25

Blue Star delivered a robust financial performance in FY25, with consolidated revenue from operations reaching Rs. 11,976.7 crores, marking a 23.6% year-on-year growth. The net profit before exceptional items grew significantly by 38.6% to Rs. 772.4 crores. The company's EBITDA margin expanded by 40 basis points to 7.3% for the full year, reflecting improved operational efficiency and scale benefits. For Q4 FY25, revenue grew 20.8% to Rs. 4,018.96 crores, and PBT before exceptional items increased by 16.2% to Rs. 248.82 crores.

Mixed Start to Summer Season and Revised FY26 Outlook

The summer season began with challenges, as the industry experienced a 15-20% degrowth in April due to high channel inventory and sporadic rains. Despite an internal target of 25-30% growth for April, Blue Star managed a 5% growth in primary sales, attributing it to dealers stocking up on fears of compressor shortages. Consequently, the company revised its FY26 overall revenue growth outlook to 10-15%, with a potential to reach 20% under extremely favorable conditions, down from earlier expectations.

Segmental Performance and Market Share Gains

The Electro-Mechanical Projects and Commercial Air Conditioning Systems segment grew 27.2% in FY25, with its segment result margin improving to 8.2%. The Unitary Products segment, which includes Room ACs and Commercial Refrigeration, saw 22.4% revenue growth in FY25, with its margin at 8.4%. The Room AC business achieved a significant milestone of 1.53 million units in sales volume for FY25, increasing its market share to close to 14%. The Professional Electronics and Industrial Systems segment, however, experienced a 7.7% de-growth in FY25.

Commercial Refrigeration Recovery and Market Leadership

The Commercial Refrigeration business, which was impacted by regulatory changes in H1 FY25, showed signs of recovery and significant growth from April onwards. Blue Star holds strong market positions in this segment, with approximately 31% market share in deep freezers and 32% in modular cold rooms. The company anticipates a 30% growth potential for this segment, driven by the underpenetrated Indian market and rising demand from various sectors like quick commerce and healthcare.

Strategic Investments in R&D, Localization, and Distribution

Blue Star continues its commitment to strategic investments, allocating 1.5-2% of its revenue to R&D for product development, cost efficiency, and sustainability, including VRF technology. The company is also focusing on localization efforts, having signed an MOU with Hindalco for local copper sourcing and exploring domestic manufacturing for critical components. Distribution expansion, particularly in Northern India, and investments in after-sales support are key priorities to capitalize on demand momentum.

Healthy Order Book and Strong Cash Position

The company's carried forward order book grew 9.9% year-on-year to Rs. 6,263.4 crores as of March 31, 2025, providing strong revenue visibility. Order inflow for Q4 FY25 increased by 17.5% to Rs. 1,439.9 crores. Blue Star maintains a robust net cash position of Rs. 640.35 crores, an increase from Rs. 455.9 crores in the previous year, which supports its ongoing investments and growth initiatives.

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