Brokerage firm Nirmal Bang has reiterated its 'Buy' rating on Blue Star Ltd. with a target price of Rs 1,834, suggesting an upside of roughly 22% from current levels. The positive outlook is backed by expectations of strong growth in the room air conditioner market and demand for data centre projects. However, investors may monitor competitive pressures and potential margin risks in the cooling products segment.
Nirmal Bang Institutional Research has reiterated its 'Buy' rating on Blue Star Ltd., setting a target price of Rs 1,834 per share. This target implies a potential upside of approximately 22% from the stock's recent market price of Rs 1,508.
The brokerage’s positive stance is primarily driven by the company's strong positioning to capture growth in the room air conditioner (RAC) industry. The firm forecasts an 18% volume compound annual growth rate (CAGR) for this sector over the next five years. Beyond consumer goods, the firm highlights the company’s business-to-business (B2B) division as a key pillar for future revenue. Specifically, the strong order pipeline for mechanical, electrical, and plumbing (MEP) projects within the growing data centre sector is expected to provide steady support for earnings.
From a financial perspective, the brokerage projects an adjusted earnings per share (EPS) CAGR of roughly 16% for the FY26-FY28 period. It also anticipates the company’s return on capital employed (RoCE) will reach 16% by FY28. These projections imply a forward price-to-earnings (P/E) multiple of about 45.5 times, which the brokerage views as aligned with the company's historical 10-year average valuation.
While the growth outlook remains optimistic, investors should also consider the inherent risks in this sector. The cooling products market, particularly for room ACs, is currently witnessing intense competition. In regions like North India, Blue Star faces pressure from brands with smaller market shares that are competing on pricing.
Furthermore, the company's profitability is sensitive to demand trends, particularly during the festive season, which often dictates the margin performance of the Unitary Cooling Products (UCP) segment. Investors may watch whether the company can maintain its profit margins while navigating these competitive dynamics. Additionally, as with any large-scale infrastructure-dependent business, the speed and efficiency with which the company executes its data centre MEP order book will be a key monitorable for future financial results.