Blue Star Ltd (BLUESTARCO) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to Blue Star Limited Q2 and H1 FY27 earnings conference call. We have with us today from the management, Mr. B. Thiagarajan, Managing Director, Blue Star Limited, and Mr. Nikhil Sawhney, Group Chief Financial Officer, Blue Star Limited. As a reminder, all participant lines will be in the listen-only mode and there'll be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded.
Moderator: over to Mr. B. Thiagarajan. Thank you, and over to you, sir.
B. Thiagarajan (Blue Star Limited): Thank you. Good morning, ladies and gentlemen. It's a pleasure interacting with you over this conference call. Thank you for joining. You may have already read the results. Blue Star's Q2 FY27 consolidated revenue growth was around 21%, and the operating profit grows by around 10.5%. The broad big picture is this: big picture is the revenue growth was robust across the segment and the room air conditioners, specifically, did extremely well on the back of extended summer season and the festival season stalking beginning. The margins continue to be under pressure. You may recall, after the Q1 results, I had expressed my own disappointment over the profits that we delivered and, in fact, I had stated that it's it's not a typical Blue Star result at all and we are ashamed of delivering that kind of numbers in Q1. As I speak to you, I feel much more confident for the simple reason Q2 turned out to be a period of consolidation and a lot of initiatives undertaken in order to get back to the margin levels, specifically in the unitary cooling products. We had indicated that we are confident of getting back to at least 6.5%. A lot of work is happening and we I feel much more confident now that the the we will end the financial year Of course, it it is entirely now going to be two big windows. One is the real festival season from Diwali till the New Year, the other one is the pre-summer sales February and March. This is what will determine the margins. But we are in the right direction. But that that is what we can confirm to you. And the In specifically the room air conditioners, I I am preempting that so that in the questions it it should not be repeated. First request is because it is a selective disclosure, please do not ask the question about commercial refrigeration revenue value or the EBIT value, okay? We We don't We have not been reporting. One day we may decide to report. As of now, we are not reporting that. But what I can tell you is that the room air conditioner growth for the industry as well as Blue Star has been good. And the the Q2 standalone, the industry growth would have been as high as 35 to 40%. We don't have the exact primary sales figures. Blue Star figure is around 42%, the primary growth. And the industry growth for H1, we estimate it to be around 30% in in value terms, and Blue Star growth is somewhere around 28, 29. And in the process, we have held onto our market share. To recap, we had lost the market share in the month of April in the tertiary sales. We tried to pass on the pr- price increase in April aggressively. It didn't happen. We had to correct the customer offers. We had to correct the prices. In the process, we gained market share marginally from May onwards. So May, June, July, August, September, we have been gaining market share of what we lost in a critical month of April. But the margins had crashed, and it is beginning to pick up. As we move to Q3, the margin should improve further. In Q4, if the pre-summer sale
B. Thiagarajan (Blue Star Limited): are going to be robust. We believe that we will we will be able to get to that target we gave of this year at least 6.5 we will attempt for the segment too. The whole year estimate of mine, that FY '25 to FY '26, there was a was a degrowth because the it was a bad summer year. FY '27, season has been good. Extended summer season is on. Festival season indications so far has been good. The I think the revenue growth for room air conditioners could be as high as 25%. The next information I want to disclose is the commercial refrigeration, which was doing badly, is showing signs of revival. I think it will begin to grow from this quarter onwards, that is from Q3 onwards it should begin to grow. Now there are only two concerns that we have got. One is the poor monsoon leading to, or the monsoon shortfall leading to lower demand in Tier 3, 4, 5 towns, one part of the problem. The second part of the problem eh wi- which can impact the demand is the interest rates which are going up in the process, consumer finance, many other triggers can lead to demand beginning to slow down. These are two apprehensions that we have got. But so far, it has been good. The the demand is exceeding our expectations. Fortunately, it is not a energy label change year. We have decided to rejig our product portfolio. That that is if if I were to list some 10-15 activities which are top priority, the foremost one will be how to rejig the product portfolio in order to get back our margins in room air conditioners. The second important part is that we will, while answering the questions I will explain the electromechanical projects business, it is it is the order booking has been excellent. Revenue growth should be big picking up from Q3 onwards, primarily driven by the data center segment. The second segment which is doing well is the factories. We are defocussing ourselves from the infrastructure segment. The buildings are yet to pick up in a big way. So, this is a overall summary. Now I hand it over to Mr. Nikhil Nikhil Sawhney for his remarks.
Nikhil Sawhney (Blue Star Limited): Thank you, Mr. Thiagarajan. Good morning, ladies and gentlemen. I'll give you a short overview of the results for the quarter ended September '26. Since many of you would have already gone through the results, I'll keep the briefing short. In Q1 FY '27, the extended summer season resulted in robust demand for room ACs, and it helped the company to post a strong revenue growth. However, margins were under pressure across the businesses due to continued escalation in material cost, and our inability to fully pass on the same. In the meanwhile, various cost optimization initiatives are being, beginning to show results. Financial highlights for the quarter ended on consolidated basis are already summarized and uploaded. I'll give you the two key figures which don't get covered in the stock exchange releases or the results after that. One is the carried forward order book as of September 30, 2026, which marginally grew to Rs. 7,229 crores as compared to Rs. 7,120 crores as of September 30, 2025. And the carried forward order book as of March 31, '26 stood at Rs. 6,923 crores. The quarter ended with net cash position of Rs. 289 crores as on September 30, 2026, as compared to the net borrowings of Rs. 417 crores as of September 30, 2025. This was this improvement was on account of better management of working capital and lower working capital levels. Coming to the business highlights, segment 1, that is electromechanical projects and commercial air conditioning systems, the segment revenue grew 16.3% to
Nikhil Sawhney (Blue Star Limited): two crores in the quarter two of last year. Electromechanical projects during the quarter the order inflows were mainly from data centers, while the inquiry inflows are good from factories as well. We expect significant growth in order inflows in the coming months. The growth of billing during this quarter was sluggish as execution of few projects experienced delays. Coming to commercial air conditioning systems, the commercial air conditioning business recorded strong revenue growth this quarter driven by robust demand across health care, education, and industrial segments. On the international business front, with growing acceptance of our heat pump solutions in the US market, the supplies continued despite challenging supply chain and logistics environment. We are pursuing development and testing of products and solutions for few more OEMs in the US and Europe. We expect this business to accelerate once tariff-related uncertainties are resolved. The segment result was Rs. 133 crores which was 6.9% of revenue in quarter two of FY '27, as compared to Rs. 147 crores which was 8.8% of revenue in Q2 FY '26. The margins as it mentioned were impacted primarily due to material cost escalations. Coming to segment two which is unitary products. The revenue grew 29.4% to Rs. 898 crores in Q2 FY '27 as compared to Rs. 694 crores in Q2 FY '26. The cooling and purification products business, the delayed monsoon and extended summer supported the room AC business with strong demand. While we have been increasing the prices periodically, only a portion of material cost escalations could be passed on. In the process the margins continued to be under pressure. The company has embarked on a program to reject the product portfolio with differentiated and cost optimized SKUs in order to improve the margins. Commercial refrigeration business, we are beginning to see a revival in demand for commercial refrigeration. Here again the inability to pass on the entire material cost escalation has kept margins under pressure. Thus, the segment result was lower at Rs. 21 crores which was 2.3% of revenue as compared to Rs. 43 crores which was 6.2% of revenue in Q2 FY '26. Coming to last segment which is professional electronics and industrial systems, the revenue grew by 51% to 97 crores in Q2 FY '27 as compared to Rs. 64 crores in Q2 FY '26. The segment result was 23 crores which is 23.7% of revenue in Q2 FY '27 as compared to Rs. 6.2 crores which is 9.6% of revenue in Q2 FY '26. During this quarter, the company sold its MedTech business for total consideration of 35.6 crores. The transaction was completed on August 31, 2026. Since the company is no longer required to render warranty obligations for MedTech business, the provisions pertaining to same have been written back which resulted in improved profitability. Industrial solution business continued its strong growth momentum and data security solutions continued with steady performance. Coming to business outlook. We continue to witness robust demand for room ACs during the festival season and many more orders for data center MEP projects are expected to be finalized in the coming months. There is a revival of demand for commercial air conditioning and refrigeration products. The monsoon shortfall, consequent drop in farm income and interest rate hike can have a potential impact on demand. On the other end the conclusion of US trade deal and possible resolution of West Asia crisis can be the tailwinds. While we remain optimistic about the revenue growth momentum in H2 FY '27, our thrust will be on improving the margins through price revisions and product cost optimizations. With that I open up for questions.
Moderator: Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question.
B. Thiagarajan (Blue Star Limited): Yes.
Moderator: First question is from line of Manoj Gori from Equirus Capital. Please go ahead.
Manoj Gori (Equirus Capital): Yeah. Thank you for the opportunity, sir.
Manoj Gori (Equirus Capital): when we talk about 6.5% guidance, this translates around 8% plus UC, unitary products margin during the second half. Based on the price hikes taken in October and product reject. So at this juncture, at the current RM prices, we are confident that we should be able to deliver 8% plus margin in unitary product, which obviously would be aided by operating leverage also given RAC sales and commercial refrigeration picking up. That's my first question, sir.
112 more turns of this transcript: log in to Stocksigma to read the full call.