Blue Star’s (BSL) topline declined substantially by 14.5% y-o-y to Rs538.5 crore (Rs629.8cr) in 1QFY2010, on account of a delay in project execution, due to the economic slowdown.
Further, the decline in the topline was also on account of a considerable fall in realisations.
The sales of the Central Air-conditioning Systems (CAS), which is the largest division of the company, declined by 15% to Rs323 crore (Rs380.1cr).
The Turnover of the Cooling Products (CP) division was also down by 11.5% to Rs190.9 crore (Rs215.9cr). The Professional Electronics and Industrial Equipment (PEI) division faced the maximum decline in sales, of 29.4% to Rs24.7 crore (Rs35cr).
Net Profit grew 13.1% y-o-y, during the quarter, to Rs41.2 crore (Rs36.4cr), while the Interest cost for the quarter declined by 79% to Rs0.4 crore (Rs2cr). The company’s Other Income also fell by 38.5% y-o-y to Rs1.7 crore (Rs2.7cr).
The economic slowdown has resulted in a considerable decline in the demand for Air Conditioning systems and Cooling Products. Moreover, there has also been a delay in project execution on account of a deferment of the capex plans.
While the Retail and IT sectors are the worst affected sectors, the demand from Infrastructure and other sectors like Hospitality, Education and Government continue to be robust.
Going ahead, based on the guidance given by the management, we expect the company to clock a moderate growth in its business, on account of the improvement in Order inflows. We expect the company’s Top-line to grow at a CAGR of 22% over FY2009-11E.
At the CMP, the stock is trading at 13.1x FY2011E EPS and 5x FY2011E P/BV. We recommend an ACCUMULATE view on the stock.