According to reports from CNBC TV18, HSBC has upgraded Blue Star Ltd. from its previous 'hold' rating to 'buy' with a price target of ₹1,780 per share, implying an 18% upside from its previous close. The brokerage cited the company's strong order book, data centre play, scope for margin expansion and focus on core business as key factors behind the upgrade. However, shares of Blue Star opened higher but have given up gains to trade 0.3% lower at ₹1,503.2 on Tuesday, with the stock still down 15% year-to-date.
As reported by CNBC TV18, Blue Star reported mixed first quarter results with revenue increasing 13.3% to ₹3,378 crore, though this was below the CNBC-TV18 poll estimate of ₹3,547 crore. The company's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) declined 12% to ₹175 crore from the previous year and was well below Street estimates of ₹247 crore. The company's EBITDA margin contracted to 5.2% from 6.7% in the year-ago period and was below the Street estimate of 7%.
According to CNBC TV18, the room air conditioner (RAC) industry grew 25% in the June quarter with an estimated volume growth of 20%-22%. However, Voltas fared better than Blue Star in the first quarter, as reported by HSBC. Looking at summer sales (January to June), Blue Star had stable margins despite slow growth from a high base, though the brokerage has cut its estimates on lower margin guidance.
As reported by CNBC TV18, of the 27 analysts covering Blue Star, 13 have a 'buy' rating, 9 have a 'hold' rating and 5 have a 'sell' rating. The company's share price has corrected by 23% this year compared with 8% for Voltas, making Blue Star's valuations more favourable according to HSBC. Despite the upgrade, the stock's performance reflects ongoing market concerns about the company's margin pressures and competitive positioning.
