The government has recently exempted key components such as grooved copper tubes and air conditioner compressors of two-tonne capacity and above from mandatory BIS certification. This is to ease concerns for the ensuing summer to prevent shortages as temperatures increase. The Indian Meteorological Department has announced a heat wave warning, with the maximum and minimum temperatures to remain elevated and above the normal benchmark across India.
The country is expected to see an above-normal heat wave over the next few months. Hence , air conditioner companies such as Blue Star and Voltas have recently seen their share prices go up on the back of higher sales for the fourth quarter of FY25. Blue Star is quite optimistic about the growth prospects in the next few quarters on the back of the onset of the summer season, potential revival in government spending, and capex by the private sector. Blue Star is expecting a 25% growth in the air conditioner segment, having secured components and raw materials in advance for the coming summer season.
The company closed the third quarter ending December 2024 on a high note, delivering superlative financial results. Blue Star outperformed the market with a revenue growth of 25% and an operating profit growth of around 35% for Q3FY25. There are a few categories within the consumer durable space in the FMCG category that are yet to witness a revival, but the company is optimistic in the near term on the back of higher sales in the summer season. With the weather changing fast, company dealers are stocking up on products. There are a few headwinds faced by the company, such as supply chain restrictions after the US elections and an escalation in the cost of raw materials.
But there are positives also, with most segments doing well, particularly in the Tier 3, 4, and 5 towns, smaller shops, showrooms, boutiques, etc., along with continuing investment in data centres. The company management is focusing on preparing the company for the future by managing tight control on costs and investing in research and development and digitalisation. The room air conditioner business has been an outlier, having shown an exceptional growth trajectory benefiting from the strong festive season demand.
Revenue from operations for Q3 FY25 grew by 25% to Rs 2807 crores as compared to Rs 2241 crores in Q3 of the last year. EBITDA for Q3FY25 improved to Rs 208 crores, while margins stood at 7.5% of revenue as compared to Rs 155 crores and an EBITDA margin of 6.9% as during Q3FY24. Profit before tax grew 24.5% to Rs 167 crores in Q3FY25 as compared to Rs 134 crores for Q3FY24. Tax expenses for Q3FY25 were Rs 46.53 crores as compared to Rs 333.93 crores in Q3FY24. Net profit for Q3 FY25 grew 31.8% to Rs 132.46 crores as compared to Rs 100.46 crores in the corresponding quarter of last year. EPS for Q3FY25 stood at Rs 6.44 as compared to Rs 4.89 for Q3FY24. The order book also stood at a record high of Rs 6801 crores as compared to Rs 6038 crores for December 31, 2023 . Segment-wise , the electromechanical projects and commercial air conditioning revenue business grew by 32.2%.
The international business grew in line with its long-term guidance, and the company is quite optimistic in its global ambitions. In the Unitary Product segment, consisting of cooling and purification products and commercial refrigeration , revenue grew by 21.9% for Q3FY25 to Rs 1164 crores. On the other hand , the professional electronics and industrial system segment showed muted growth and many challenges. Blue Star expects this particular segment of business to improve in the next fiscal year. Recently, Blue Star has announced a likely increase in room air conditioner prices by 4-5% in April next month, which will translate into higher profit margins for the fourth quarter of FY25. Blue Star has recently intimated to the stock
Analysts and fund managers are bullish on the Blue Star scrip, and hence investors can add it to their investment portfolio. But investors should do their own due diligence and check with their broker and advisor before buying any shares.