1QFY2019 Result Update | Cons. Durable
August 10, 2018
Blue Star Ltd
BUY
CMP
`703
Performance Update
Target Price
`867
1QFY19
1QFY18
% chg. (yoy)
4QFY18
% chg. (qoq)
Investment Period
12 Months
Net Sales
1,508
1,520
(0.8)
1,346
12.0
Stock Info
Operating profit
137
111
23.6
60
126.6
Sector
Cons. Durable
OPM (%)
9.1
7.3
179bp
4.5
458bp
Market Cap (` cr)
6,771
Adj. PAT
92
76
20.3
31.7
188.8
Net Debt (` cr)
210
Beta
0.2
Source: Company, Angel Research
52 Week High / Low
845/611
For 1QFY2019, Blue Star posted results below our expectations on the top-line,
Avg. Daily Volume
20,316
Face Value (`)
2
however, it reported healthy growth on the bottom-line front. The company has
BSE Sensex
38,024
Nifty
11,471
reported flat top-line growth (after adjustment of GST, revenue growth was ~7%)
Reuters Code
BLUS.BO
and PAT was up ~20% yoy.
Bloomberg Code
BLSTR IN
Gained market share in AC segment but overall top-line remained flat: The
Shareholding Pattern (%)
Promoters
38.8
company’s top-line was flat on yoy basis (after adjustment of GST, revenue
MF / Banks / Indian Fls
20.0
FII / NRIs / OCBs
9.3
growth was ~7%) at `1,508cr on the back of muted performance across
Indian Public / Others
31.9
segments. However, Electro-Mechanical Project Systems segment grew by ~3%
Abs.(%)
3m
1yr
3yr
yoy during the quarter, whereas Unitary Products segment reported ~4% de-
Sensex
7.6
18.3
34.8
Blue Star
(13.5)
0.0
88.7
growth yoy due to seasonality impact.
Healthy operating performance, one time gain aided overall profitability: On the
operating front, the company’s margins improved by 179bps yoy on the back of
lower raw material prices and higher sales mix of inverted AC (a higher margin
business). On the bottom-line front, company reported a growth of ~20% yoy to
3-year price chart
`92cr on account of better operating margins and one time exceptional income.
900
Outlook & Valuation: We forecast Blue Star to report top-line CAGR of ~13% to
800
700
`5,955cr over FY18-20E on the back of healthy demand growth in Air
600
500
Conditioning and Unitary Products division. On the bottom-line front, we estimate
400
300
~19% CAGR to `205cr owing to improvement in volumes and better operating
200
100
margins. We maintain our Buy recommendation on Blue Star with a target price of
0
`867.
Key Financials
Source: Company, Angel Research
Y/E March (`cr)
FY2017
FY2018
FY2019E
FY2020E
Net Sales
4,385
4,648
5,209
5,955
% chg
13.5
6.0
12.1
14.3
Net Profit
123
144
165
204
% chg
12.2
17.0
14.4
24.1
OPM (%)
5.1
5.7
6.0
6.2
Amarjeet S Maurya
022-39357800 Ext: 6831
EPS (Rs)
12.8
15.0
17.2
21.3
P/E (x)
54.6
46.7
40.8
32.9
P/BV (x)
8.9
8.2
7.6
7.0
RoE (%)
16.3
17.7
18.7
21.2
RoCE (%)
16.5
17.0
19.3
21.8
EV/Sales (x)
1.7
1.6
1.4
1.2
Please refer to important disclosures at the end of this report
1
Blue Star Ltd | 1QFY2019 Result Update
Exhibit 1: 1QFY2019 Performance
Y/E March (` cr)
1QFY19
1QFY18
% chg. (yoy)
4QFY18
% chg. (qoq)
FY2018
FY2017
% chg
Net Sales
1,508
1,520
1,346
4,648
4,385
(0.8)
12.0
6.0
Net raw material
1071.9
945.1
3229.0
3112.25
1,119
(4.2)
13.4
3.8
(% of Sales)
71.1
73.6
70.2
69.5
(254)
89
71.0
Employee Cost
100
88
13.0
108
(7.3)
398
339
17.3
(% of Sales)
6.6
5.8
8.0
8.6
81
(138)
7.7
Other Expenses
199
202
(1.2)
233
(14.5)
756
712
6.2
(% of Sales)
13.2
13.3
17.3
16.3
(6)
(410)
16.2
Total Expenditure
1,371
1,409
(2.7)
1,286
6.6
4,382
4,163
5.3
Operating Profit
137
111
23.6
60
126.6
266
222
20
OPM (%)
9.1
7.3
4.5
5.72
179
458
5.07
65
Interest
12
5
151.6
11
13.0
29
38
(23.9)
Depreciation
16
13
28.3
18
(12.1)
64
61
5.3
Other Income
3
9
(61.3)
4
(12.6)
17
35
(51.0)
PBT
112
102
9.8
35
218.2
190
159
20.0
(% of Sales)
7.4
6.7
2.6
4.1
3.6
Exceptional Items
-
15.2
5
5.3
Tax
33
26
25.6
8.24
294.4
49
37
34.8
(% of PBT)
29.1
25.4
23.4
26.0
23.1
Reported PAT before MI & Extra Ord.
95
76
24.3
32
193.7
146
122
19.8
Items
PATM
6.3
5.0
2.4
3.1
2.8
Minority Interest
(0)
(0)
0
P/L of Ass. Co.
(3)
0
(1)
(2)
1
Extra-ordinary Items
-
(0)
(0)
Reported PAT
92
76
20.3
31.71
188.8
144
123
17.0
Source: Company, Angel Research
August 10, 2018
2
Blue Star Ltd | 1QFY2019 Result Update
Key investment arguments
Cooling Products division - the backbone of growth: Company is estimating
+20% growth (outperform the market at 15-20% growth) in FY19E in the cooling
products division. Further, owing to the strong growth in this summer, the market is
expected to be further driven by the rise in demand.
Newer products and strong demand to aid overall profitability: Blue Star is
planning to add two brand new models to its RAC product range in FY19, it has
four models currently. The company is planning to launch one high wall-cordless
split AC model around the same time. Besides that, increase in demand from large
government related infra projects like metro and some small segments from
hospitals and educational institutions will also boost sales.
Wide distribution network: Blue Star has a strong presence in the South and West
regions of India and is now planning to increase its presence in North. Hence,
company has already increased its dealer count and is taking steps to improve per
dealer output in Northern region. Moreover, Bluster Silicones, an overseas
subsidiary of China National Bluster (Group) signed a distribution agreement with
Grasim Industries in India for its whole series of silicone products in an attempt to
expand its distribution network in India and increase its market share.
August 10, 2018
3
Blue Star Ltd | 1QFY2019 Result Update
Outlook & Valuation: We forecast Blue Star to report top-line CAGR of ~13%
to `5,955cr over FY18-20E on the back of healthy demand growth in Air
Conditioning and Unitary Products division. On the bottom-line front, we estimate
~19% CAGR to `205cr 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.
August 10, 2018
4
Blue Star Ltd | 1QFY2019 Result Update
Consolidated Profit & Loss Statement
Profit & Loss Statement
Y/E March (`cr)
FY2017
FY2018
FY2019E
FY2020E
Total operating income
3,863
4,385
4,648
5,209
% chg
20.5
13.5
6.0
12.1
Total Expenditure
3,703
4,163
4,382
4,896
Raw Material
1,938
3,112
3,229
3,547
Personnel
417
339
398
448
Others Expenses
1,347
712
756
901
EBITDA
160
222
266
313
% chg
54.8
39.0
19.6
17.5
(% of Net Sales)
4.1
5.1
5.7
6.0
Depreciation& Amortisation
57
61
64
71
EBIT
103
162
202
242
% chg
71.0
57.2
24.9
19.6
(% of Net Sales)
2.7
3.7
4.3
4.6
Interest & other Charges
43
38
29
33
Other Income
73
35
17
20
(% of PBT)
54.9
21.8
8.9
8.7
Share in profit of Associates
-
-
-
-
Recurring PBT
132
159
190
229
% chg
210.6
19.7
20.0
20.2
Tax
28
37
49
62
(% of PBT)
20.9
23.1
26.0
27.0
PAT (reported)
105
122
141
167
Minority Interest (after tax)
1
0
0
0
Profit/Loss of Associate Company
1
1
2
2
Extraordinary Items
(5)
-
5
-
ADJ. PAT
110
123
144
165
% chg
15.2
12.2
17.0
14.4
(% of Net Sales)
2.8
2.8
3.1
3.2
Basic EPS (Rs)
11.4
12.8
15.0
17.2
Fully Diluted EPS (`)
11.4
12.8
15.0
17.2
% chg
15.2
12.2
17.0
14.4
August 10, 2018
5
Blue Star Ltd | 1QFY2019 Result Update
Consolidated Balance Sheet
Y/E March (`cr)
FY2017
FY2018
FY2019E
FY2020E
SOURCES OF FUNDS
Equity Share Capital
19
19
19
19
Reserves& Surplus
738
796
862
943
Shareholders Funds
757
815
881
962
Minority Interest
1
1
1
1
Total Loans
221
371
371
371
Deferred Tax Liability
24
24
24
24
Total Liabilities
1,004
1,211
1,277
1,359
APPLICATION OF FUNDS
Gross Block
359
399
439
479
Less: Acc. Depreciation
72
135
206
284
Net Block
288
264
233
195
Capital Work-in-Progress
34
34
34
34
Investments
79
79
79
79
Current Assets
2,141
2,425
2,708
3,060
Inventories
596
815
928
1,061
Sundry Debtors
939
1,019
1,142
1,305
Cash
97
81
107
116
Loans & Advances
390
394
417
465
Other Assets
120
116
115
113
Current liabilities
1,670
1,732
1,915
2,144
Net Current Assets
471
693
793
916
Deferred Tax Asset
132
132
132
132
Mis. Exp. not written off
-
-
-
-
Total Assets
1,004
1,211
1,277
1,359
August 10, 2018
6
Blue Star Ltd | 1QFY2019 Result Update
Consolidated Cash flow Statement
Y/E March (`cr)
FY2017
FY2018
FY2019E FY2020E
Profit before tax
159
190
229
283
Depreciation
61
64
71
78
Change in Working Capital
(105)
(238)
(73)
(113)
Interest / Dividend (Net)
19
29
33
28
Direct taxes paid
2
(49)
(62)
(76)
Others
(26)
0
0
0
Cash Flow from Operations
159
(4)
197
199
(Inc.)/ Dec. in Fixed Assets
(107)
(40)
(40)
(40)
(Inc.)/ Dec. in Investments
177
0
0
0
Cash Flow from Investing
69
(40)
(40)
(40)
Issue of Equity
7
0
0
0
Inc./(Dec.) in loans
6
150
0
0
Dividend Paid (Incl. Tax)
(2)
(86)
(99)
(123)
Interest / Dividend (Net)
(185)
(7)
(32)
(27)
Cash Flow from Financing
(174)
57
(131)
(150)
Inc./(Dec.) in Cash
54
12
26
10
Opening Cash balances
15
68
81
107
Closing Cash balances
68
81
107
116
August 10, 2018
7
Blue Star Ltd | 1QFY2019 Result Update
Key Ratios
Y/E March
FY2017
FY2018
FY2019E
FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
58.8
49.8
40.8
34.0
P/CEPS
39.7
33.6
29.3
25.0
P/BV
9.6
8.9
8.2
7.5
Dividend yield (%)
1.0
1.2
1.5
1.8
EV/Sales
1.7
1.6
1.4
1.2
EV/EBITDA
32.7
27.0
23.1
19.7
EV / Total Assets
7.3
6.1
5.8
5.4
Per Share Data (`)
EPS (Basic)
12.8
15.1
18.5
22.2
EPS (fully diluted)
12.8
15.1
18.5
22.2
Cash EPS
19.0
22.4
25.7
30.2
DPS
7.5
9.1
11.1
13.3
Book Value
78.9
84.9
92.3
101.2
Returns (%)
ROCE
16.5
17.9
19.9
22.3
Angel ROIC (Pre-tax)
20.2
20.7
23.2
26.0
ROE
16.3
17.8
20.0
21.9
Turnover ratios (x)
Asset Turnover (Gross Block)
12.2
11.9
12.2
12.7
Inventory / Sales (days)
50
64
65
65
Receivables (days)
78
80
80
80
Payables (days)
98
95
93
90
Working capital cycle (ex-cash) (days)
30
49
52
55
Source: Company, Angel Research
August 10, 2018
8
Blue Star Ltd | 1QFY2019 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 has not independently verified all the information contained within this document. Accordingly, we cannot testify,
nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory,
compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
Disclosure of Interest Statement
Company Name
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%)
August 10, 2018
9
