Blue Star Limited , a leading air conditioning and commercial refrigeration company, reported mixed results for the first quarter, with revenue growth offset by a decline in profitability due to unseasonal rains impacting the Room Air Conditioner (RAC) segment.

Revenue Growth Amid Challenges

The company's revenue from operations grew by 4.1% to Rs. 2,982.00 crores, compared to Rs. 2,865.00 crores in the same quarter last year. However, net profit declined to Rs. 120.82 crores from Rs. 168.76 crores in the previous year, primarily due to the impact of unseasonal rains on the RAC segment.

Segment Performance

Electro-Mechanical Projects and Commercial Air Conditioning Systems

This segment showed robust growth, with revenue increasing by 35.9% to Rs. 1,412.50 crores. The segment result was Rs. 111.60 crores, representing 7.9% of revenue. The order inflow for the quarter stood at Rs. 1,963.00 crores, up from Rs. 1,466.00 crores in the previous year.

Unitary Products

The Unitary Products segment, which includes RACs, faced significant challenges. Revenue declined by 13.3% to Rs. 1,499.40 crores, with a segment result of Rs. 87.50 crores, representing 5.8% of revenue. Despite the overall decline, Blue Star managed to slightly improve its market share to approximately 14.2% in the RAC category.

Professional Electronics and Industrial Systems

This segment experienced a 27.3% decline in revenue to Rs. 70.40 crores, with a segment result of Rs. 7.70 crores, representing 10.8% of revenue.

Profitability and Margins

The company's EBITDA (excluding other income) was Rs. 199.99 crores, with an EBITDA margin of 6.7%, compared to 8.3% in the same quarter last year. The compression in margins was primarily due to the impact on the RAC segment and the loss of operating leverage benefits.

Order Book and Future Outlook

Blue Star's carried-forward order book grew by 12.5% to Rs. 6,843.00 crores, indicating a strong pipeline for future projects. The company maintains a positive outlook for the full year, expecting demand revival during the festive season and anticipating double-digit growth, supported by a strong B2B order book and upcoming energy label changes.

Management Commentary

B. Thiagarajan, Managing Director of Blue Star Limited, commented on the results: "While the first quarter was disappointing due to unseasonal rains severely impacting Room Air Conditioner demand, we remain optimistic about the growth prospects for the full year. Our B2B segments showed resilience, and we expect demand revival during the festive season. The upcoming energy label changes typically drive pre-buying behavior, which should contribute to our growth."

Blue Star continues to focus on expanding its distribution footprint, particularly in Tier 3, 4, and 5 cities, and maintaining a diverse product portfolio to cater to various market segments. The company remains committed to its long-term vision for growth and innovation, with ongoing investments in manufacturing, R&D, and digitalization.

As Blue Star navigates through these challenging market conditions, it aims to leverage its diverse business portfolio and strong market position to drive growth and maintain profitability in the coming quarters.

Blue Star Ltd. , a leading air conditioning and commercial refrigeration company, has set an ambitious target of 15% compound annual growth rate (CAGR) in revenue between FY26 and FY28, despite facing headwinds in the first quarter of FY26. The company's Chairman and Managing Director, Vir S Advani, remains optimistic about future growth prospects, citing expected strong demand for air conditioners and refrigerators.

Q1 FY26 Performance

Blue Star reported a mixed financial performance for Q1 FY26:

• Revenue from operations grew by 4.1% to ₹2,982.25 crore, compared to ₹2,865.37 crore in Q1 FY25.
• EBITDA (excluding other income) decreased to ₹199.99 crore (6.7% of revenue) from ₹237.83 crore (8.3% of revenue) in Q1 FY25.
• Net profit declined to ₹120.82 crore from ₹168.76 crore in the same quarter last year.

The company attributed the muted Q1 performance to deferred demand and unseasonal rains across India, which particularly affected the Room Air Conditioning segment.

Segment Performance

Electro-Mechanical Projects and Commercial Air Conditioning Systems

This segment showed strong growth, with revenue increasing by 35.9% to ₹1,412.46 crore. The growth was driven by demand from factories, data centers, and the healthcare sector. However, the segment's EBIT margin contracted to 7.9% from 9.9% in Q1 FY25.

Unitary Products

The Unitary Products segment, which includes room air conditioners and commercial refrigeration, saw a 13.3% decline in revenue to ₹1,499.37 crore. The segment's EBIT margin also contracted to 5.8% from 9.1% in Q1 FY25, primarily due to the poor performance of the room air conditioner business.

Professional Electronics and Industrial Systems

This segment experienced a 27.3% decline in revenue to ₹70.42 crore, mainly due to challenges in the MedTech and Data Security businesses. However, the segment's EBIT margin improved to 10.8% from 9.9% in Q1 FY25.

Future Outlook

Despite the challenging start to FY26, Blue Star remains confident about its growth prospects:

1. The company expects the air conditioning industry to grow at a 20% CAGR.
2. Blue Star anticipates strong demand in the second half of the year, particularly during the festive season.
3. The company is targeting an EBIT margin improvement of at least 100 basis points over the next few years.
4. Blue Star continues to invest in manufacturing capacity, Research & Development, and digitalization initiatives.

Market Position and Inventory Management

Blue Star estimates that its market share has slightly improved to above 14% in the room air conditioner segment. The company currently holds 75 days of inventory, which is about 30 days higher than normal post-summer levels. However, Blue Star has avoided aggressive discounting due to better inventory management.

Conclusion

While Blue Star faced challenges in Q1 FY26, particularly in its room air conditioner business, the company's diversified portfolio and strong performance in other segments provide a buffer against market volatility. With its focus on innovation, expansion, and strategic investments, Blue Star appears well-positioned to achieve its ambitious growth targets in the coming years.

Investors and industry observers will be keenly watching how Blue Star navigates the evolving market conditions and capitalizes on the expected demand revival in the latter half of the fiscal year.