BLUESTARCO - Blue Star Ltd Share Price

In the earnings call for Q1 FY26, Blue Star Limited's management, led by Managing Director B. Thiagarajan and Group CFO Nikhil Sohoni, provided an outlook that emphasized a cautious yet optimistic view for the upcoming quarters. Despite facing challenges due to unseasonal rains affecting demand for Room Air Conditioners (RAC), management projected that the overall air conditioning market would recover, driven primarily by the festive season.

Key forward-looking points include:

1. Growth Forecast: The management continues to anticipate a Compound Annual Growth Rate (CAGR) of 19% for the Room Air Conditioning business over the next five years, despite acknowledging a disappointing current quarter.

2. B2B Business Resilience: The B2B segment's order book has reached an all-time high, contributing positively despite the downturn in the B2C segment. The order book in this domain grew by 12.5% year-over-year to Rs. 6,843 crores as of June 30, 2025.

3. Full-Year Expectations: Management expressed optimism about achieving a revenue growth target of 10% to 15% for the full fiscal year, primarily due to expectations of pent-up demand during the festival season.

4. Profit Margins: For the Unitary Products segment, management expects profit margins to vary between 7% and 8%, influenced by historical trends of performance following a weaker summer season.

5. Strategic Investments: Blue Star plans to continue investing in manufacturing capacity, research & development, and digitalization to ensure sustainable growth despite catering to market challenges.

Overall, while the first quarter results reflected difficulties, management's outlook remains anchored in long-term growth potential, leveraging strategic segments and enhanced operational efficiencies.

Major Questions and Answers from Blue Star Limited's Q1 FY26 Earnings Call

Question 1:

Aniruddha Joshi (ICICI Securities): "In case of UCP business, if you can indicate the revenue growth rates in RAC, air cooler, and even commercial refrigeration separately? What is the inventory as of either 30th June or even 31st July? What initiatives has the company done to clear excess inventory? Finally, will the company be able to exhaust all the trade inventory by January 2026?"

Answer: "Unfortunately, we can't disclose revenue growth rates by product category as it is selective disclosure. Regarding inventory, we have around 30 days' excess which won't be an issue, and we'll correct manufacturing accordingly. No additional discounts have been necessary due to adequate demand management. Consumers anticipate energy label changes, often leading to preemptive buying in Q3. We're prepared and focused on market situations, ensuring research and development remains robust."

Question 2:

Shivkumar Prajapati (Ambit Investment Advisors): "For the UCP segment, given competitors' drastic declines, how do you account for Blue Star's resilience and improved market share?"

Answer: "Our success stems from a diversified product range and strategic distribution expansion, particularly in under-indexed areas. We ended Q4 with around 14% market share, likely improved to 14.2% currently. We've continued gaining market share by addressing all price points and emphasizing product availability where needed, ensuring we're better positioned than competitors."

Question 3:

Natasha Jain (Phillip Capital): "Could you elaborate on channel expansion and market performance across geographies? How are non-South markets performing?"

Answer: "Market share gains are due to a comprehensive product strategy beyond mere distribution numbers. We track performance in each locality, focusing efforts where our share lags. While South has traditionally underperformed, current trends indicate demand is stabilizing. We aim to grow internationally without sacrificing profitability or return on capital employed, currently focusing on several non-U.S. markets."

Question 4:

Akshen Thakkar (Fidelity): "What growth should we expect in Electro-Mechanical Projects and Unitary Products this year?"

Answer: "Electro-Mechanical Projects aim for around 15% growth, driven by ongoing infrastructure and commercial demand across diverse segments. For Unitary Products, we anticipate a growth of 10% to 15%. The festival season and energy label changes are expected to drive demand, yet the environment remains uncertain, focusing closely on market conditions."

Question 5:

Keyur Pandya (ICICI Prudential Life): "Are you witnessing any demand revival in Southern markets in light of upcoming festivals? What's your inventory situation?"

Answer: "Initial signs are positive with upcoming festivals like Onam forecasted to boost demand. We've managed our inventory effectively, currently a month above normal levels, and are prepared for the festival season. With pre-buying expected as consumers anticipate the energy label changes, we expect a good season ahead."

Question 6:

Devesh Advani (Reliance General Insurance): "What expectations do you have for UCP revenue growth and profitability this year?"

Answer: "We're focused on the Room Air Conditioner business, expecting a 10% to 15% growth in line with market trends. However, specific financial guidance isn't provided for segment breakdowns. Our margin aspirations are for around 7% to 8%, influenced by first-quarter impacts but aiming for recovery as sales improve."

This summarizes key questions from the Q&A section, providing insights into Blue Star Limited's current performance and future outlook.