Blue Star Limited , a leading air conditioning and commercial refrigeration company, reported a 6.4% year-on-year revenue growth to Rs. 2,422.00 crores in Q2, despite facing multiple challenges including prolonged rains and GST rate reduction impacts. The company's net profit saw a modest increase of 2.8% to Rs. 99.00 crores compared to Rs. 96.00 crores in the same quarter last year.

Financial Highlights

Segment Performance

Electro-Mechanical Projects and Commercial Air Conditioning Systems

• Revenue grew by 16.5% to Rs. 1,664.00 crores
• Segment result improved to 8.8% of revenue from 8.3% in the previous year's corresponding quarter
• Order inflow remained flat at Rs. 1,922.00 crores

Unitary Products

• Revenue declined by 9.5% to Rs. 694.00 crores
• Segment result decreased to 6.2% of revenue from 7% in the previous year's corresponding quarter

Professional Electronics and Industrial Systems

• Revenue decreased by 20.1% to Rs. 64.00 crores
• Segment result improved to 9.6% of revenue from 6.4% in the previous year's corresponding quarter

Challenges and Impacts

Blue Star faced several challenges during the quarter:

1. Prolonged rains and lower temperatures impacting secondary sales
2. GST rate reduction announcement deferring demand until implementation
3. High inventory levels of 65 days versus the ideal 45 days
4. Continued weather disruptions affecting market demand

Management Commentary

B. Thiagarajan, Managing Director of Blue Star Limited, commented on the results: "It was a tough quarter. The fundamentals are strong, and the growth story for the industry remains robust. However, this particular financial year is challenging." He added, "We have revised our growth guidance from positive 5% to flat growth for the year, considering the current market conditions and inventory levels."

Outlook

• The company expects the second half to be better than the first half but remains cautious about making up for the shortfall in H1.
• Blue Star anticipates potential pressure on margins due to high inventory levels in the market.
• The management remains optimistic about long-term prospects, citing a CAGR of over 15% for the industry in recent years.
• The company continues to focus on growing faster than the market, controlling expenses, and maintaining margins.

Blue Star's performance in Q2 reflects its resilience in a challenging environment. While the company has shown growth in revenue and maintained profitability, the revised guidance indicates a cautious approach for the remainder of the fiscal year. The company's diverse business segments and strong order book provide a buffer against market volatilities, but weather-related disruptions and inventory management remain key challenges in the near term.

Blue Star Limited , a leading air conditioning and commercial refrigeration company, has revised its revenue growth guidance and faced challenges in the market, leading to a significant drop in its share price.

Revised Guidance and Market Reaction

• Blue Star has revised its revenue growth guidance to flat from the previous 5% projection.
• The company's shares declined over 6% following this announcement.
• Shares traded 5.5% lower at ₹1,814.4, down 10% from daily highs.

Challenges and Market Conditions

• The company reported challenges during the festive season despite GST rate reductions on consumer durables like air conditioners.
• Blue Star maintains a 65-day inventory that needs clearing before energy norm changes in January 2026.
• Management expects the Room AC industry to decline 15% but believes Blue Star will outpace industry growth.

Financial Outlook

• The company projects EBITDA margins of 7% to 7.5% for both Electro-Mechanical Projects (EMP) and Unitary Products (UCP) segments for the remainder of the year.
• Blue Star aims to maintain current margin levels despite the challenging market conditions.

Segment Performance

Electro-Mechanical Projects and Commercial Air Conditioning Systems

• The Electro-Mechanical Projects business saw good enquiry inflow but muted order finalization.
• Commercial Air Conditioning business growth aligned with market trends, with Blue Star maintaining leadership in key product categories.

Unitary Products

• The segment was affected by unfavorable weather conditions and the mid-quarter GST rate rationalization announcement.

Professional Electronics and Industrial Systems

• The segment experienced a decline, primarily due to uncertainties in the MedTech Solutions Business.
• Industrial Solutions and Data Security Solutions continued to perform well.

Future Outlook

Despite the current challenges, Blue Star remains focused on prudent cost management and optimizing working capital levels to enhance performance in the coming periods. The company expects a potential rise in demand during the Christmas and New Year period, driven by the upcoming energy label change scheduled for implementation on January 1, 2026.

Blue Star's ability to navigate these challenging market conditions and its strategy to outpace industry growth will be crucial for its performance in the coming quarters.