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Target: ₹1,517
CMP: ₹1,223.15
Blue Star’s return ratios are expected to expand in FY23 (H1-FY23 net income ₹117 crore, FY22 net income ₹167 crore), unlike its peers in durables and FMEG. Its project business’ bright outlook for H2-FY23 and FY24 is supported by its strong order book as H1 FY23 order inflows shot up 89 per cent year on year. The commissioning of the Sri City plant by January 2023 could aid the CY23 summer volume growth.
Q2-FY23 revenue rose 27 per cent y-o-y, backed by robust growth across all verticals. Revenue booking at projects rose 33 per cent y-o-y to ₹960 crore. The EBITDA margin dipped 30 bps y-o-y despite a 20-bp y-o-y gross margin expansion as staff cost/other expenses rose 17 per cent/49 per cent y-o-y. PAT jumped 36 per cent y-o-y, as the Q2-FY23 tax rate was 26 per cent (34 per cent a year ago). Gross debt at end-Q2-FY23 rose to ₹720 crore.
Post-Q2FY23, our FY23/FY24 revenues have risen 6 per cent/5 per cent. However, our net income estimates are largely intact considering the competitive market context, which can constrain the pace of margin expansion.
Risks: Inability to gain market share and reduce capital employed in UCP is a risk to our earnings. Significant delays in project execution could impact project margins.
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