Any current/future new fundraising through debt or equity?

Blue Star is planning to raise funds primarily through equity via a Qualified Institutional Placement (QIP) to ensure an optimum capital structure for future growth. The Board has approved raising up to Rs. 1,000 Cr, with flexibility to raise through debt or equity, though equity is preferred. Current gross debt is around Rs. 600 Cr, net debt approx Rs. 283 Cr as of June 2023. The capital raise is intended to fund around Rs. 750 Cr CAPEX over the next 2-3 years, support working capital needs, retire some high-cost debt, and strengthen the balance sheet for future debt capacity. The company wan

Any current/future capex/capital investment/strategic investment?

Blue Star plans approximately Rs. 750 Cr CAPEX over the next 3 years, mainly in FY24 and FY25, with lower investments expected in FY26. Investments include expanding manufacturing capacity at Sri City from 300,000 units to 600,000 units, and further phases to reach 1.2 million units. Additional land (40 acres) acquired at Sri City 2 for future expansion focused on commercial air conditioning for domestic and export markets. Investments also planned in sub 300-litre capacity at Wada facility. Fundraise approved (up to Rs. 1,000 Cr) primarily for equity to strengthen the balance sheet for future

Future growth expectations in sales/revenue/volumes?

Industry room air conditioner market size expected to grow from 8 million units to 10 million units in FY24 and to 13 million by FY25. Blue Star aims to grow its room AC volume from 8 lakh units last year to at least 10 lakh units in FY24. Full-year unitary product segment growth estimate is revised to 10-15%, down from earlier higher targets. Festival season expected to show better sales than last year, helping revive demand. Commercial refrigeration and electro-mechanical projects segments expected to continue robust growth driven by infrastructure and capex cycle. Long-term target

Future growth expectations in earnings/operating earnings/profits/EPS?

Blue Star anticipates steady growth in Unit Air Conditioners (UCP) segment around 10-15% for FY24, with Blue Star growing similarly. EBIT margins for UCP are expected to be maintained at 8% to 8.5% on a full-year basis, adjusting for increased competitive landscape and capacity expansion. The company foresees overall revenue growth driven by continued investments in infrastructure, corporate capex, healthcare, and other sectors. Carried-forward order book has grown 37.4% to Rs. 5,359 Cr, indicating strong future project revenues. Net profit grew 12.2% in Q1FY24, with operating scale an

Current/ Expected Orderbook/ Pending Orders?

Carried-forward order book as of June 30, 2023, was Rs. 5,359.05 Cr, up 37.4% from Rs. 3,901.48 Cr as of June 30, 2022. Carried-forward order book as of March 31, 2023, stood at Rs. 5,042.27 Cr. Electro-Mechanical Projects business order book was Rs. 4,038.14 Cr as on June 30, 2023, growing 45.4% from Rs. 2,777.45 Cr as on June 30, 2022. Order inflow for Q1FY24 was Rs. 1,224.65 Cr, slightly lower than Rs. 1,365.90 Cr in Q1FY23. Pending order book mainly includes Electro-mechanical projects and Commercial Air Conditioning ducted systems (inverter ducted and VRF). Orders are of high quality, str

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Blue Star LtdQ2 FY23Consumer Durables

Blue Star Ltd Q2 FY23 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹1,656P/E: 61.2Market Cap: ₹34.1K CrSector: Consumer Durables

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Industry room air conditioner market size expected to grow from 8 million units to 10 million units in FY24 and to 13 million by FY25.
→Blue Star aims to grow its room AC volume from 8 lakh units last year to at least 10 lakh units in FY24.
→Full-year unitary product segment growth estimate is revised to 10-15%, down from earlier higher targets.
→Festival season expected to show better sales than last year, helping revive demand.
→Commercial refrigeration and electro-mechanical projects segments expected to continue robust growth driven by infrastructure and capex cycle.
→Long-term target of steady EBIT margin at 8-8.5% amid evolving competitive landscape.
→Export market development (Europe, North America) plans underway, but significant order wins expected only in 5-10 years.
→Capacity expansions (Sri City phases 2 and 3) aligned with growth plans, supported by Rs. 750 Cr investments over next 2-3 years.

Margin guidance

Category 3

→Blue Star anticipates steady growth in Unit Air Conditioners (UCP) segment around 10-15% for FY24, with Blue Star growing similarly.
→EBIT margins for UCP are expected to be maintained at 8% to 8.5% on a full-year basis, adjusting for increased competitive landscape and capacity expansion.
→The company foresees overall revenue growth driven by continued investments in infrastructure, corporate capex, healthcare, and other sectors.
→Carried-forward order book has grown 37.4% to Rs. 5,359 Cr, indicating strong future project revenues.
→Net profit grew 12.2% in Q1FY24, with operating scale and better realizations contributing to improved EBITDA margin of 6.5%.
→Blue Star expects capacity expansions (Rs. 750 Cr CAPEX over 3 years) to support scaling operations and profitability.
→Long-term balanced capital structure and investments in R&D aim to sustain future earnings growth and EPS improvements.

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Fundraise plans

Yes

→Blue Star is planning to raise funds primarily through equity via a Qualified Institutional Placement (QIP) to ensure an optimum capital structure for future growth.
→The Board has approved raising up to Rs. 1,000 Cr, with flexibility to raise through debt or equity, though equity is preferred.
→Current gross debt is around Rs. 600 Cr, net debt approx Rs. 283 Cr as of June 2023.
→The capital raise is intended to fund around Rs. 750 Cr CAPEX over the next 2-3 years, support working capital needs, retire some high-cost debt, and strengthen the balance sheet for future debt capacity.
→The company wants to avoid overleveraging, preferring a net debt-to-EBITDA ratio below 0.25-0.3.
→Debt financing for working capital will continue alongside the equity raise.
→Fundraising is a long-term strategy for scaling up manufacturing capacity expansion, including new investments like Sri City 2 facility.

Order book

Yes

→Carried-forward order book as of June 30, 2023, was Rs. 5,359.05 Cr, up 37.4% from Rs. 3,901.48 Cr as of June 30, 2022.
→Carried-forward order book as of March 31, 2023, stood at Rs. 5,042.27 Cr.
→Electro-Mechanical Projects business order book was Rs. 4,038.14 Cr as on June 30, 2023, growing 45.4% from Rs. 2,777.45 Cr as on June 30, 2022.
→Order inflow for Q1FY24 was Rs. 1,224.65 Cr, slightly lower than Rs. 1,365.90 Cr in Q1FY23.
→Pending order book mainly includes Electro-mechanical projects and Commercial Air Conditioning ducted systems (inverter ducted and VRF).
→Orders are of high quality, strictly reviewed by the Risk Committee.
→Pipeline remains healthy with enquiries from manufacturing, data centers, healthcare, hospitality, railway electrification, metro railway, and Tier 3-5 towns.

Capex plans

Yes

→Blue Star plans approximately Rs. 750 Cr CAPEX over the next 3 years, mainly in FY24 and FY25, with lower investments expected in FY26.
→Investments include expanding manufacturing capacity at Sri City from 300,000 units to 600,000 units, and further phases to reach 1.2 million units.
→Additional land (40 acres) acquired at Sri City 2 for future expansion focused on commercial air conditioning for domestic and export markets.
→Investments also planned in sub 300-litre capacity at Wada facility.
→Fundraise approved (up to Rs. 1,000 Cr) primarily for equity to strengthen the balance sheet for future growth and CAPEX needs.
→Working capital requirements to increase with scale; the company aims to optimize capital structure without overleveraging.
→Commitment to R&D investments aligns with product portfolio expansion and export market requirements, with a strategy update expected in six months.

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