For 2QFY2019, Blue Star posted results above our expectations on the top-line front; however, bottom-line numbers came below expectations. The company has reported 21.5% top-line growth, whereas PAT was down ~14% yoy due to losses in JV and higher interest cost.

Outlook & Valuation: We forecast Blue Star to report top-line CAGR of ~13% to `5,854cr over FY2018-20E on the back of healthy demand growth in Air Conditioning and Unitary Products division. On the bottom-line front, we estimate ~18% CAGR to `201cr owing to improvement in volumes and better operating margins. We maintain our Buy recommendation on Blue Star with a target price of `867.

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