Blue Star Limited
Know the Company
Blue Star Limited (Blue Star) is a leading player in India’s household appliances industries including Air Conditioning, Refrigeration, and Mechanical & Electrical sectors. With over eight decades of expertise, the company has emerged a niche for itself as India’s premier central air-conditioning and commercial refrigeration provider.
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The Company’s comprehensive range of cooling solutions including chillers, room air conditioners, deep freezers, water coolers, and cold rooms. Its portfolio has also expanded to include air purification, commercial kitchen refrigeration, and medical-grade refrigeration solutions.
Blue Star has seven state-of-the-art manufacturing facilities across India, including units in Ahmedabad, Dadra, Himachal Pradesh, and Andhra Pradesh. Its new plants are located in Sri City and Wada, which all are equipped with advanced technology to meet growing market demands. Additionally, its wholly-owned subsidiary, Blue Star Engineering & Electronics, provides advanced technology products, maintenance solutions and turnkey engineering services, making it a leader in diagnostic equipment refurbishment and industrial systems.
On the global stage, Blue Star exports its products to 23 countries, including markets in the Middle East, Africa, SAARC, and ASEAN regions, primarily through its subsidiary, Blue Star International FZCO. The company’s global footprint continues to expand with wholly-owned subsidiaries in the U.S., Europe, and Japan, strengthening its international presence.
Business Divisions
Electro-Mechanical Projects and Packaged Air Conditioning Systems: This division is Blue Star’s flagship business, provides a comprehensive range of products and services, including air conditioning, refrigeration, and MEP (Mechanical, Electrical, and Plumbing) solutions.
Unitary Products: The Unitary Products division of the company manufactures a wide range of air conditioning and commercial refrigeration products, including room air conditioners, container air conditioners, and water coolers.
Professional Electronics and Industrial Systems: Blue Star’s Professional Electronics and Industrial Systems division offers several electronic and industrial solutions, including data centre solutions, industrial automation, testing and measuring instruments, etc. This division has partnered with several international companies to provide cutting-edge solutions to Indian industries.
International Business Group: The International Business Group of Blue Star is responsible for the company’s exports and international operations. This division has established a presence in several countries, including the Middle East, Africa, and Southeast Asia, and exports a range of products, including air conditioning and refrigeration systems.
After-Sales Service: Blue Star’s After-Sales Service division provides comprehensive support to customers, including maintenance, repair, and refurbishment of products. This division has established a wide network of authorized service centres across India, ensuring prompt and efficient service to customers.
Strengths
Blue Star has established itself as a leader in the Indian air conditioning and commercial refrigeration industry through its innovative, value-driven products and solutions. Recognized for superior quality, reliability, and durability, the company’s offerings, coupled with exceptional after-sales service, it ensures enduring customer satisfaction. The company operates a strong network of seven state-of-the-art manufacturing facilities, more than 30 offices, and over 10,000 retail outlets across India. Its extensive reach covers over 900 towns, supported by 2,100 service centres.
One of Blue Star’s key strengths is its integrated business model, which includes manufacturing, engineering, procurement, and construction (EPC) services, along with after-sales support. This holistic approach enables the company to provide comprehensive turnkey solutions, including allied contracting services such as electrical, plumbing, fire-fighting, and industrial projects.
The company has a well-established track record and a strong market presence in the Electro-Mechanical Projects segment, ranking among the top two players in the industry. The company also holds the leading position in the commercial refrigeration business within the Unitary Products (UP) segment.
Blue Star’s manufacturing footprint spans over 1 lakh sq. m, with a strong emphasis on product development and research. The company operates four advanced R&D centres focused on energy efficiency, eco-friendly technologies, and sustainable products, reinforcing its leadership in innovation. Blue Star has applied for 46 patents and 46 design registrations to date and was granted six patents during FY24.
Blue Star’s Electro-Mechanical Projects division has a robust order book of Rs 5,037 crore as of September 2024, a 9.3% year-on-year increase. This segment benefits from surging demand in infrastructure, data centres, and commercial real estate. Similarly, its commercial air conditioning systems division continues to improve margins and expand offerings across manufacturing, healthcare, education, and real estate sectors. Despite temporary economic slowdowns in Europe, shipments to the U.S. and other regions are gradually scaling, positioning Blue Star as a reliable and innovative manufacturer on the international market too. The company’s unwavering focus on sustainable growth and technological innovation solidifies Blue Star’s reputation as a market leader.
Blue Star has significantly increased its market share in the room air-conditioning segment, growing from 10% in fiscal 2016 to 13.75% in fiscal 2024. Its extensive distribution network further strengthens its strong market position.
Financials Advances
For Q2 FY25, Blue Star reported robust financial performance, with revenue growth exceeding 20%, operating profit growth of around 22%, and a net profit increase of over 36%. The Room Air Conditioners segment saw exceptional growth of 27%, contributing significantly to an overall revenue increase of approximately 25%. Notably, the Room Air Conditioners segment achieved remarkable volume growth of over 53% in the first half of the current financial year and revenue growth of around 45%. On a consolidated basis, revenue rose to Rs 2276 crore in Q2 FY25, compared to Rs 1,890 crore in Q2 FY24. During the same period, EBITDA improved to Rs 149 crore, with an EBITDA margin of 6.6%, compared to Rs 123 crore and a margin of 6.5% in Q2 FY24. Net profit for the period surged by 36% to Rs 96 crore in Q2 FY25, up from Rs 71 crore in Q2 FY24.
Strong Balance Sheet
In September 2023, Blue Star successfully raised Rs 1,000 crore through a Qualified Institutional Placement (QIP) by issuing 1.29 crore equity shares at an issue price of Rs 770 per share to institutional investors. With a portion of the QIP, the company significantly reduced its debt to Rs 167 crore as of March 2024, compared to Rs 578 crore as of March 2023. The company’s Debt protection metrics remain robust, with an interest coverage ratio exceeding 10x in fiscal 2024. Blue star has a strong net worth exceeding Rs 2,500 crore as of March 31, 2024, supported by steady growth in cash accruals.
Blue Star reported a strong order inflow of Rs 1,899 crore for Q2 FY25, compared to Rs 1,765 crore in Q2 FY24, reflecting steady growth. The carried-forward order book of the company as of September 30, 2024, increased by 10% to Rs 6,598 crore, up from Rs 6,008 crore as of September 30, 2023, highlighting robust momentum in order accumulation.
Industry Scenario
The room air conditioner (AC) industry expected to perform well in the foreseeable future, driven by evolving consumer lifestyles and extreme heat conditions. Rising disposable incomes and a growing preference for comfort in residential spaces have further boosts demand for room ACs. Additionally, the availability of extensive consumer financing options has significantly contributed to increased sales. Another key factor contributing to growth is the reduction in power consumption, facilitated by advancements under the Energy Saving Scheme. These trends collectively support the optimistic outlook for the room AC industry in India.
The commercial air conditioning segment is also thriving, showing excellent performance across order inflow, margins, and demand from various sectors. This segment experiencing robust growth, driven by the increasing number of data centres, malls, airports, and similar infrastructure developments.
Outlook
The outlook for the Room Air Conditioner, Electro-Mechanical Projects, and Commercial Air Conditioning segments remains highly positive. While the Commercial Refrigeration business faced challenges in Q1 and Q2 of FY25 due to regulatory changes, its long-term prospects remain strong. Blue Star continues to invest in research and development, manufacturing, and digitalization. As a result, the management anticipates FY25 to be another landmark year. Changing weather patterns, resulting in hotter summers, along with the company’s robust product portfolio in both residential and commercial air conditioning and refrigeration, provide confidence in a strong and promising business outlook.
Combined with an expanded product portfolio and strategic marketing initiatives, Blue Star is poised for long-term growth, delivering robust returns to investors and increasing its global market share.
Risks and Concerns
The company’s primary operating risks is potential slowdowns in construction and investment cycles, which could negatively impact the performance of its products and services. Additionally, the company faces intense competition from both domestic and global players, along with challenges faced by volatile commodity prices and high interest rates. Furthermore, the Electro-Mechanical Projects segment involves large working capital requirements, adding financial risk due to the nature of EPC activities.
Sector: Consumer Durables
Market Price: Rs. 1922.95 as on today
FV: Rs 2/-
Stock Name: Blue Star Ltd
BSE Code: 500067, NSE Code: BLUESTARCO
Market Cap.: Rs 38300 Cr
Book Value: Rs. 133
Segment: Household Appliances
Incorporation: 1949
Headquarters: Mumbai, India
