4QFY2019 Result Update | Cons. Durable
May 6, 2019
Blue Star Ltd
BUY
CMP
`698
Performance Update
Target Price
`867
4QFY19
4QFY18
% chg. (yoy)
3QFY19 % chg. (qoq)
Investment Period
12 Months
Net Sales
1,596
1,346
18.5
1,099
45.2
Stock Info
Operating profit
107
60
76.9
35
203.8
Sector
Cons. Durable
OPM (%)
6.7
4.5
221
3.2
349
Market Cap (` cr)
6,759
Net Debt (` cr)
210
Adj. PAT
82
28
198.5
4.0
1,932.9
Beta
0.2
52 Week High / Low
830/507
Source: Company, Angel Research
Avg. Daily Volume
18,198
Face Value (`)
2
For 4QFY2019, Blue Star posted results above our expectations on both top-line & bottom-
BSE Sensex
38,655
line front. The company reported 18.5% yoy top-line growth and PAT was up ~199% yoy
Nifty
11,619
Reuters Code
BLUS.BO
due to strong operating performance and one-time deferred tax credit recognized by the
Bloomberg Code
BLSTR IN
Company’s subsidiary Blue Star Engineering & Electronics Ltd.
Shareholding Pattern (%)
Strong revenue growth across segments boosted top-line: The company’s top-line grew
Promoters
38.8
MF / Banks / Indian Fls
21.6
18.5% yoy at `1,596cr on the back of strong performance in EMP business (up ~21% yoy)
FII / NRIs / OCBs
7.6
driven by increased pace of execution of projects in the Electro-Mechanical projects business
Indian Public / Others
32.1
and enhanced sales of chillers and VRF systems in the Commercial Air conditioning business.
Abs.(%)
3m
1yr
3yr
Further, the revenue of Unitary Products business increased by ~19% yoy due to strong
Sensex
6.6
10.8
53.2
growth in deep freezers and storage water coolers in the commercial refrigeration business
Blue Star
15.9
(11.3)
64.9
coupled with growth in the air coolers and water purifiers businesses. Sales grew in the RAC
segment by ~3% yoy, thus increasing the market share to ~12.3%. However, Professional
Electronics and Industrial Systems business’ revenue de-grew~11% yoy during the quarter.
Adj. PAT grew ~199% yoy: On the operating front, the company’s margins improved by
221bps yoy on the back of price hike. The bottom-line registered growth of ~199% yoy to
`82cr due to strong operating performance and one-time deferred tax credit recognized by
the Company’s subsidiary Blue Star Engineering & Electronics Ltd.
3-year price chart
Outlook & Valuation: We forecast Blue Star to report top-line CAGR of ~13% to `6,680cr
900
over FY2019-21E on the back of healthy demand growth in Air Conditioning and Unitary
800
Products division. On the bottom-line front, we estimate ~14% CAGR to `246cr owing to
700
600
improvement in volumes and better operating margins. We maintain our Buy
500
recommendation on Blue Star with a Target Price of `867.
400
300
Key Financials
200
100
Y/E March (`cr)
FY2018
FY2019
FY2020E
FY2021E
0
Net Sales
4,648
5,235
5,891
6,680
% chg
6.0
12.6
12.5
13.4
Source: Company, Angel Research
Net Profit
144
188
205
246
% chg
17.0
30.5
8.9
20.2
OPM (%)
5.7
6.4
6.5
6.8
EPS (Rs)
15.0
19.6
21.3
25.6
P/E (x)
46.5
35.6
32.7
27.2
P/BV (x)
8.1
7.5
6.8
6.2
RoE (%)
17.3
21.0
20.9
22.8
RoCE (%)
16.7
20.9
23.0
25.8
EV/Sales (x)
1.5
1.3
1.2
1.0
Amarjeet S Maurya
EV/EBITDA (x)
26.2
20.5
17.8
15.0
022-39357800 Ext: 6831
Source: Company, Angel Research Note: CMP as of May 3, 2019
Please refer to important disclosures at the end of this report
1
1
Blue Star Ltd | 4QFY2019 Result Update
Exhibit 1: 4QFY2019 Performance
Y/E March (` cr)
4QFY19
4QFY18
% chg. (yoy) 3QFY19
% chg. (qoq)
FY2019
FY2018
% chg
Net Sales
1,596
1,346
18.5
1,099
45.2
5235
4639
12.8
Net raw material
1198.4
1,005
19.3
837.7
43.1
3931
3455
13.8
(% of Sales)
75.1
74.6
48
76.2
(113)
75.1
74.5
Employee Cost
109
108
1.2
107
2.4
421
398
6.0
(% of Sales)
6.8
8.0
(117)
9.7
(286)
8.1
8.6
Other Expenses
182
174
4.5
120
51.8
548
520
5.3
(% of Sales)
11.4
12.9
(152)
10.9
49
10.5
11.2
Total Expenditure
1,489
1,286
15.8
1,064
40.0
4,901
4,373
12.1
Operating Profit
107
60
76.9
35
203.8
334
266
26
OPM (%)
6.7
4.5
221
3.2
349
6.38
5.73
65
Interest
11
11
2.7
13
(16.0)
48
29
66.6
Depreciation
24
18
29.5
18
29.7
75
64
17.4
Other Income
6
9
(33.4)
10
(41.7)
40
22
79.4
PBT
78
40
93.2
14
451.2
251.14
195.57
28.4
(% of Sales)
4.9
3.0
63.0
1.3
4.8
4.2
Exceptional Items
Tax
1
8
(92.0)
1
(33.3)
42
49
(15.0)
(% of PBT)
0.8
20.4
7.0
16.7
25.3
Reported PAT before MI & Extra Ord. Items
78
32
140.5
13
487.5
209
146
43.1
PATM
4.9
2.4
1.2
4.0
3.2
Minority Interest
0
0
0
0
0
P/L of Ass. Co.
2
(1)
(14)
-19
-2
Extra-ordinary Items
2
(4)
5
-2
-4
Reported PAT
82
28
198.5
4
1,932.9
188
140
34.2
Source: Company, Angel Research
May 6, 2019
2
Blue Star Ltd | 4QFY2019 Result Update
Outlook & Valuation:
We forecast Blue Star to report top-line CAGR of ~13% to `6,680cr over FY2019-21E on the
back of healthy demand growth in Air Conditioning and Unitary Products division. On the
bottom-line front, we estimate ~14% CAGR to `246cr owing to improvement in volumes and
better operating margins. We maintain our Buy recommendation on Blue Star with a Target
Price of `867.
Downside risks to our estimates
Any slowdown in consumer segments like IT/ITES, healthcare, hospitality and
infrastructure could impact the company’s growth.
Foreign exchange fluctuations have a direct impact on the profit of the cooling
products division since commercial refrigerators are imported.
The RAC industry has been witnessing high traction and the company has been
able to outperform the industry over the past few years. Any unexpected drop in
performance of the RAC industry would pose a threat to our estimates.
Company Background
Blue Star Limited is an air-conditioning and commercial refrigeration company. The
company conducts various activities, such as electrical, plumbing and fire-fighting
services. Its segments include Electro-Mechanical Projects and Packaged Air
Conditioning Systems, and Unitary Products. The Electro-Mechanical Projects and
Packaged Air-Conditioning Systems segment includes central air-conditioning
projects, electrical contracting business and packaged air-conditioning businesses,
including manufacturing and after sales service. The Unitary Products segment
includes cooling appliances, cold storage products, including manufacturing and
after sales service. The company's products include central air conditioning, room
air conditioners and speciality cooling products. Its other businesses include
marketing and maintenance of imported professional electronic equipment and
services, as well as industrial products and systems, which is handled by Blue Star
Engineering & Electronics.
May 6, 2019
3
Blue Star Ltd | 4QFY2019 Result Update
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2018
FY2019
FY2020E
FY2021E
Total operating income
4,648
5,235
5,891
6,680
% chg
6.0
12.6
12.5
13.4
Total Expenditure
4,382
4,901
5,508
6,226
Raw Material
3,229
3,931
4,006
4,543
Personnel
398
421
518
601
Others Expenses
756
548
984
1,082
EBITDA
266
334
383
454
% chg
19.6
25.6
14.6
18.6
(% of Net Sales)
5.7
6.4
6.5
6.8
Depreciation& Amortisation
64
75
79
87
EBIT
202
259
304
367
% chg
24.9
28.2
17.3
20.7
(% of Net Sales)
4.3
5.0
5.2
5.5
Interest & other Charges
29
48
41
41
Other Income
17
40
22
22
(% of PBT)
8.9
15.9
7.7
6.3
Share in profit of Associates
-
-
-
Recurring PBT
190
251
285
347
% chg
20.0
32.0
13.3
22.1
Tax
49
42
80
97
(% of PBT)
26.0
16.7
28.0
28.0
PAT (reported)
141
209
205
250
Minority Interest (after tax)
0
0
0
1
Profit/Loss of Associate Company
2
19
-
3
Extraordinary Items
5
2
-
-
ADJ. PAT
144
188
205
246
% chg
17.0
30.5
8.9
20.2
(% of Net Sales)
3.1
3.6
3.5
3.7
Basic EPS (`)
15.0
19.6
21.3
25.6
Fully Diluted EPS (`)
15.0
19.6
21.3
25.6
% chg
17.0
30.5
8.9
20.2
May 6, 2019
4
Blue Star Ltd | 4QFY2019 Result Update
Consolidated Balance Sheet
Y/E March (`cr)
FY2018
FY2019
FY2020E
FY2021E
SOURCES OF FUNDS
Equity Share Capital
19
19
19
19
Reserves& Surplus
812
877
959
1,057
Shareholders Funds
831
896
978
1,076
Minority Interest
2
1
1
1
Total Loans
376
345
345
345
Deferred Tax Liability
25
24
24
24
Total Liabilities
1,234
1,261
1,344
1,449
APPLICATION OF FUNDS
Gross Block
529
439
489
539
Less: Acc. Depreciation
137
208
287
374
Net Block
392
232
203
165
Capital Work-in-Progress
25
34
34
34
Investments
13
79
79
79
Current Assets
2,659
2,715
3,019
3,468
Inventories
833
932
1,049
1,190
Sundry Debtors
1,100
1,147
1,291
1,464
Cash
81
101
131
166
Loans & Advances
518
419
459
521
Other Assets
126
115
88
127
Current liabilities
1,974
1,930
2,122
2,430
Net Current Assets
685
785
897
1,038
Deferred Tax Asset
119
132
132
133
Mis. Exp. not written off
-
-
-
-
Total Assets
1,234
1,261
1,344
1,449
May 6, 2019
5
Blue Star Ltd | 4QFY2019 Result Update
Consolidated Cash flow Statement
Y/E March (`cr)
FY2018
FY2019
FY2020E FY2021E
Profit before tax
206
251
285
347
Depreciation
64
75
79
87
Change in Working Capital
(194)
(80)
(82)
(106)
Interest / Dividend (Net)
22
48
41
41
Direct taxes paid
(45)
(42)
(80)
(97)
Others
(23)
0
0
0
Cash Flow from Operations
24
252
243
273
(Inc.)/ Dec. in Fixed Assets
(99)
(40)
(50)
(50)
(Inc.)/ Dec. in Investments
7
0
0
0
Cash Flow from Investing
(93)
(40)
(50)
(50)
Issue of Equity
13
0
0
0
Inc./(Dec.) in loans
150
(32)
0
0
Dividend Paid (Incl. Tax)
(86)
(113)
(123)
(148)
Interest / Dividend (Net)
(23)
(47)
(41)
(41)
Cash Flow from Financing
53
(192)
(163)
(188)
Inc./(Dec.) in Cash
(16)
20
30
35
Opening Cash balances
97
81
101
131
Closing Cash balances
81
101
131
166
May 6, 2019
6
Blue Star Ltd | 4QFY2019 Result Update
Key Ratios
Y/E March
FY2018
FY2019
FY2020E
FY2021E
Valuation Ratio (x)
P/E (on FDEPS)
46.5
35.6
32.7
27.2
P/CEPS
32.7
23.6
23.6
19.8
P/BV
8.1
7.5
6.8
6.2
Dividend yield (%)
1.3
1.7
1.8
2.2
EV/Sales
1.5
1.3
1.2
1.0
EV/EBITDA
26.2
20.5
17.8
15.0
EV / Total Assets
5.7
5.4
5.1
4.7
Per Share Data (`)
EPS (Basic)
15.0
19.6
21.3
25.6
EPS (fully diluted)
15.0
19.6
21.3
25.6
Cash EPS
21.3
29.6
29.6
35.2
DPS
9.0
11.7
12.8
15.4
Book Value
86.6
93.4
101.9
112.1
Returns (%)
ROCE
16.7
20.9
23.0
25.8
Angel ROIC (Pre-tax)
18.1
24.4
27.3
31.2
ROE
17.3
21.0
20.9
22.8
Turnover ratios (x)
Asset Turnover (Gross Block)
8.8
11.9
12.0
12.4
Inventory / Sales (days)
64
65
65
65
Receivables (days)
80
80
80
80
Payables (days)
95
93
90
91
Working capital cycle (ex-cash) (days)
49
52
55
54
Source: Company, Angel Research
May 6, 2019
7
Blue Star Ltd | 4QFY2019 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Investment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources
believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for
general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss
or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited
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Disclosure of Interest Statement
Blue Star
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
May 6, 2019
8
