Shares of Blue Star, a consumer durable firm, rallied strongly in the last six trading sessions, growing from ₹1,218.95 apiece to ₹1,371.50, delivering a return of 12.50%. The strong rally in the stock came after the company posted solid December quarter numbers, which exceeded analyst expectations.
On January 31, Blue Star reported a 22.79 percent rise in the consolidated net profit to ₹58.41 crore for Q3FY23. The company had posted a net profit of ₹47.57 crore in the same quarter last fiscal.
The consolidated revenue from operations during the quarter stood at ₹1,788.2 crore, growing by 18.72% as against ₹1,506 crore in the year-ago period.
The revenue from its electro-mechanical projects & commercial air conditioning systems segment, which accounts for 50% of the company's total revenue, increased by 20.05% to ₹1,000 crore in Q3FY23, as compared to ₹829.85 crore in Q3FY22.
Blue Star said its electro-mechanical project business witnessed healthy order inflows from all segments, including factories and data centers. Adding to that, the company said it also booked significant orders in the newly entered railway electrification segment.
Further, the revenue from the Unitary Products segment grew by 15.1% to ₹701.90 crore in Q3FY23 as compared to ₹609.68 crore in Q3FY22. And the revenue from the electronics and industrial systems business rose by 29.3 percent to ₹86.21 crore during the December quarter from ₹66.69 crore a year ago.
The stock, which had been steadily climbing after reaching its 52-week low of ₹859 apiece in June last year, suddenly gained momentum following the strong Q3 earnings, setting new highs with each passing day.
During the most recent trading session on Tuesday, the stock reached a lifetime high of ₹1,393.75 apiece, up 14.30% since January 31.
Following the strong December quarter performance, brokerage firm BOB Capital Markets upgraded the rating on the stock to "buy" from "hold" and lifted the target price to ₹1,450 apiece from ₹1,350 earlier.
The company's UCP performance has been a positive departure from peers, with strong margins and an upbeat outlook for Q4 FY23. In addition, the healthy EMP order book has strong tailwinds from higher infrastructure-led capex and is thus expected to maintain traction near term, the brokerage noted.
The company has commissioned commercial production at its Sri City plant from January this year, in time for the upcoming summer season. It aims to garner operating cost benefits from the plant and expects working capital days to reduce. Geographical advantages will also help to lower logistics costs, it added.
Blue Star controls a 13.25% market share and expects to close FY23 at 13.75%. The company maintains its target of a 15% share by FY25, led by growing penetration in the RAC business and above-industry growth.
Meanwhile, the company has switched to the "written down method" from the "straight line method," leading to lower depreciation in Q3, it highlighted.
With the exception of Qatar and Malaysia, where growth was muted due to country-specific headwinds, the international business expanded across verticals in Q3, the brokerage pointed out.
19 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
