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.

Blue Star Limited , a leading air conditioning and commercial refrigeration company, reported a challenging first quarter, with profits declining despite a modest increase in revenue. The company's performance was significantly impacted by unseasonal rains across India, resulting in weak summer demand for room air conditioners.

Financial Performance

For the quarter ended June 30, Blue Star's consolidated revenue from operations grew by 4.1% to Rs 2,982.25 crore, compared to Rs 2,865.37 crore in the same period last year. However, the company's net profit for the quarter declined to Rs 120.82 crore from Rs 168.76 crore, representing a 28.4% decrease.

The company's operating profit (EBITDA excluding Other Income) for the quarter stood at Rs 199.99 crore, or 6.7% of revenue, down from Rs 237.83 crore (8.3% of revenue) in the previous year. This decline in profitability was primarily attributed to the weak performance of the Unitary Products segment, which includes room air conditioners.

Segment Performance

Electro-Mechanical Projects and Commercial Air Conditioning Systems

This segment showed strong growth, with revenue increasing by 35.9% to Rs 1,412.46 crore. The segment result stood at Rs 111.62 crore (7.9% of revenue), compared to Rs 103.03 crore (9.9% of revenue) in the previous year. The company witnessed robust order bookings, particularly from factories, data centers, and the healthcare sector.

Unitary Products

The Unitary Products segment, which includes room air conditioners and commercial refrigeration, experienced a revenue decline of 13.3% to Rs 1,499.37 crore. The segment result decreased to Rs 87.47 crore (5.8% of revenue) from Rs 158.03 crore (9.1% of revenue) in the previous year. This decline was primarily due to subdued demand for room air conditioners caused by unseasonal rains and a mild summer.

Professional Electronics and Industrial Systems

This segment saw a revenue decline of 27.3% to Rs 70.42 crore. The segment result was Rs 7.62 crore (10.8% of revenue), compared to Rs 9.60 crore (9.9% of revenue) in the previous year. The segment faced challenges in the Med Tech and Data Security businesses.

Outlook and Management Commentary

Despite the challenges in the first quarter, Blue Star's management remains optimistic about the company's prospects. Vir S. Advani, Chairman & Managing Director of Blue Star Limited, stated, "We anticipate the demand to revive during the upcoming festive season. Further, our well-diversified portfolio of B2B products and solutions comprising, Electro-Mechanical Projects, Commercial Air Conditioning and Commercial Refrigeration, should help us partly offset the shortfall during the rest of the financial year."

The company maintains a robust order book, which grew by 12.5% to Rs 6,843.04 crore as of June 30, compared to Rs 6,084.69 crore a year ago. This indicates a healthy pipeline for upcoming quarters.

Blue Star continues to focus on strategic investments in manufacturing, R&D, and digitalization to drive long-term growth and innovation while ensuring sustainable value creation for stakeholders.

As the company navigates through these challenging market conditions, it remains committed to leveraging its diversified portfolio and strong market position to drive recovery in the coming quarters.