Emkay Global has reiterated its 'Buy' rating on Blue Star, setting a target price of Rs 2,000 following a 21% rise in quarterly revenue. While the company's strong sales growth and large order book drive optimism, investors should watch for potential pressure on profit margins from rising raw material costs in the coming quarters.
Emkay Global has reaffirmed its positive outlook on Blue Star, maintaining a 'Buy' rating and raising the target price to Rs 2,000. This update follows the company’s strong performance in the second quarter of the 2027 fiscal year, where it reported a 21% year-on-year increase in consolidated revenue, reaching Rs 2,930.95 crore.
Order Book and Operational Performance
A key highlight for the company is its robust order book, which stood at Rs 7,229.22 crore as of September 30, 2026. This significant pipeline provides visibility for future project execution, particularly in the electro-mechanical projects segment. However, the company is navigating a complex cost environment. In the recent quarter, EBITDA margins contracted to 6.9% from 7.6% in the same period last year. This decline is largely attributed to persistent commodity cost inflation, which has created a challenging environment for maintaining profitability despite steady revenue growth.
Management has taken steps to address these cost pressures, including calibrated price hikes. The company reported a consolidated net profit of Rs 123.91 crore for the second quarter, which includes a one-time gain of Rs 23.02 crore from the sale of its MedTech business, completed in August 2026. This divestment is part of a broader strategy to streamline operations and focus on core strengths.
Risks and Future Monitorables
While the brokerage remains optimistic about the company’s long-term earnings potential, investors should be aware of several factors that could influence performance in the second half of the fiscal year. Persistent commodity cost inflation remains a primary risk, as it puts continuous pressure on operating margins if the company cannot fully pass these costs on to customers. Additionally, the room air conditioner market in India is witnessing intensifying competition, which may restrict pricing power.
Investors may want to monitor how efficiently the company manages its input costs and whether it can improve margin stability in the coming quarters. The successful execution of the large order book will also be essential to support the projected growth. The company's ability to maintain its market share in the Unitary Products segment while balancing profitability against rising costs will be a key area to watch.