Stock Market Update on Blue Star for 4QFY2011
In 4QFY2011, Blue Star posted 6.1% yoy growth to `916cr (`863cr), which was broadly inline with our estimates. OPM fell by 176bp yoy to 11.2% (13.0%) due to higher raw-material and employee costs. The tax rate of the company for the quarter also increased to 35.0% (23.8%), as one of the factories came out of tax holiday. Overall, PAT declined by 27.6% yoy to `57cr (`79cr). The debtor and order infow position has still not improved significantly for the company. However, we expect the situation to improve going forward, especially with DS Gupta also contributing to the top line. We maintain Buy on the stock.
Billing continues to remain sluggish: Blue Star witnessed muted billings in 4QFY2011 as well, as the overall debtor position did not improve significantly. This also led to a yoy decline in margins, as the fixed costs were spread over a smaller base. Order inflow for the quarter increased by 7.2% to `805cr (`750cr), while the order book currently stands at `1,968cr (`1,699cr). The company booked revenue of ~`80cr from DS Gupta operations for FY2011. The order book of DS Gupta stands at `185cr.
Outlook and valuation: Demand from the key market segments has still not picked up. However, growth in the cooling products segment and DS Gupta remains strong. Overall, we expect the company to report a 21.3% CAGR over FY2011–13E in its top line to `4,382cr, while PAT is estimated to grow at a CAGR of 30.5% to `270cr. At the CMP, the stock is trading at 12.8x and 10.6x its FY2012E and FY2013E EPS, respectively. We maintain our Buy view on the stock with a target price of `420.