Blue Star reported a 21% year-on-year revenue increase to INR 29.3 billion for Q2 FY2027. Despite this earnings beat, analysts at Motilal Oswal kept a 'Neutral' rating with a target price of INR 1,510, highlighting concerns over premium valuations and ongoing margin pressure from rising input costs.
Blue Star reported a strong performance for the second quarter of the fiscal year 2027, with revenue reaching INR 29.3 billion. This reflects a 21% increase compared to the same period last year. The results were better than market expectations, driven by solid demand across its main business units. The Products, Engineering, and Management Services (PES) segment led the way with a 51% surge, while the Unitary Cooling Products (UCP) and Electro-Mechanical Projects and Services (EMPS) divisions also saw growth of 29% and 16%, respectively.
However, profit margins remained a point of focus. Although the company’s operating profit, or EBITDA, rose 10% to INR 2.0 billion, the operating profit margin contracted by 70 basis points year-on-year to 7%. Management noted that rising input costs have made it difficult to maintain margins, particularly in the Unitary Cooling Products business, which manufactures items like room air conditioners.
Following the results, equity analysts at Motilal Oswal kept a 'Neutral' rating on the stock with a target price of INR 1,510. This stance is largely based on the company's current valuation, which sits at a price-to-earnings (P/E) multiple of 62x for FY27 and 48x for FY28. A higher P/E ratio indicates that investors are paying a premium for the company's earnings, and analysts believe this current pricing already accounts for the expected growth.
For investors, the main risks involve the company's ability to handle raw material cost inflation and competitive pricing pressures. As the company continues to focus on large infrastructure and data center projects, the speed of execution and the ability to control costs will be critical to profitability. Moving forward, market participants will monitor whether Blue Star can improve its margins in the face of these cost pressures and how it sustains demand in the room air conditioner segment.