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Informist, Sunday, Aug. 2, 2026

By Ruchira Kagita

MUMBAI - Blue Star Ltd.'s margins are likely to have struggled in the June quarter and may continue to do so throughout the financial year 2026-27 (Apr-Mar). In fact, margin pressure is expected for all companies in the consumer durables sector as price hikes are not expected to completely offset the increase in commodity prices due to the war in West Asia. At the same time, a hotter-than-usual summer and a delayed monsoon are likely to have supported the company's sales in the reporting quarter.

Blue Star's consolidated net profit for the June quarter is expected to rise 25% on year to INR 1.52 billion, according to the average of estimates from eight brokerages. The highest estimate for the net profit is INR 1.63 billion from 360 ONE Capital Market Pvt. Ltd. and the lowest is INR 1.44 billion from JM Financial Institutional Securities Pvt. Ltd.

The room air-conditioner manufacturer's total revenues for the quarter are seen up 19% on year at INR 35.38 billion. The sales estimates range from a low of INR 34.74 billion from 360 ONE Capital to a high of INR 35.80 billion from Kotak Securities Ltd. However, Blue Star's profit and revenues are likely to fall sequentially by 28% and 13%, respectively.

For the June quarter, the company's revenues are likely to have been supported by a low base and price hikes, PhillipCapital (India) Pvt. Ltd. said. In the year-ago quarter, the company's sales had gone up 4% year-on-year to INR 29.82 billion. The consumer durables major could not fully pass on the high costs of raw materials to its customers. This is expected to be a drag on its margin for the reporting quarter, the brokerage said.

Blue Star had raised prices of its products by 5-8% following changes in the Bureau of Energy Efficiency's star rating norms, Managing Director B. Thiagarajan had told analysts in May. In the summer, the industry would have grown by around 35% in volume terms and about 30% in value terms, he had told ET Now in an interview at the end of June. The disappointment, he had said, was likely to be margins. At the industry level, of the 13% increase in costs seen till May, only 5-6% could be passed on. Blue Star was able to pass on only around 8% of that increase to its consumers, he had said.

The company will continue to spend 1.5-2.0% of its revenues on advertising and promotions, the managing director had told sector analysts earlier. As for inventory, the management had not flagged any concern as of May. Further, the company is likely to incur capital expenditure of INR 2.5 billion-INR 3.5 billion for FY27, Group Chief Financial Officer Nikhil Sohoni had told analysts.

Queries pertaining to inverter air conditioners, split air conditioners, and "best" air conditioners for homes saw "healthy" growth in the summer, SMIFS Ltd. said in a recent report, detailing consumer sentiment for air coolers and air conditioners from large-format retailers. Among major brands, searches for Daikin Air-conditioning India Pvt. Ltd. and Voltas Ltd.'s cooling products were the highest, but search traction for Blue Star and Panasonic Life Solutions India Pvt. Ltd. was also good.

For the reporting quarter, Blue Star's earnings before interest, taxes, depreciation, and amortisation are estimated to rise 24% on year to INR 2.47 billion, according to the average of six estimates. Kotak Securities estimates the company's EBITDA margin for the quarter to be 6.8%, up 10 basis points on year and down 120 bps sequentially.

The peak of cost escalation coincided with the summer, though imports ahead of the season partially offset some of the season's pressure, Thiagarajan had said in his television interview. Regaining lost margins would be "very difficult" and would happen only with an "extraordinarily" good festival season, he had said. The peak of margin erosion is likely to be witnessed in the September quarter, he had further said.

Operating margins for FY27 are estimated at 7.0-7.5%, the company's managing director had said in the TV interview, adding that this outlook will be reviewed in a few months. In May, he had said margins for the full year would be at 8.0-8.5%. For FY27, the visibility on positive levers continues to be blurred. The industry's ability to increase operating margins to 8-9% by FY30 is challenged, he had said.

Blue Star will detail its June quarter earnings Thursday. Any commentary by the management on the scope for more price hikes and a possible change in margin outlook for the financial year ending Mar. 31 will be sought. Analysts are likely to also seek updates on progress in the company's professional equipment and industrial solutions division.

Going forward, 20% of the company's revenues by FY29 will come from data centres, the managing director had said during the TV interview. Of the total revenue of INR 200 billion expected in FY29, data centres are estimated to account for around INR 40 billion.

Friday, shares of Blue Star ended at INR 1,681.20 on the National Stock Exchange, down 0.6% from Thursday. The stock has fallen nearly 4% since the company announced its earnings for the March quarter. Of the 12 research reports on the company available with Informist, eight have a "buy" recommendation on the stock with an average target price of INR 1,970. This implies an upside of around 17% from the stock's closing price Friday. Three brokerages have a "sell" call.

Following are the estimates for the June quarter earnings of Blue Star, in INR billion, from eight brokerages, in descending order of the net profit estimate:

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Edited by Shubhayan Bhattacharya

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