Whalesbook
Blue Star achieved a consolidated net profit of Rs 227.18 crore in Q4 FY26, a 17% year-on-year increase. Revenue rose a modest 1.32% to Rs 4,072.06 crore. This profit boost was partly due to one-time gains and lower taxes. The results reflect improved operating margins by 110 basis points, achieved through efficiency efforts, as the company faced a recovering Room Air Conditioner (RAC) market and strong growth in its Electro-Mechanical Projects (EMPS) business, which benefits from the booming data center sector.
Q4 Performance and Margin Gains
Net profit jumped 17% year-on-year for the quarter, driven by a combination of exceptional items and reduced tax liabilities. While revenue from operations saw a slight uptick of 1.32% to Rs 4,072.06 crore, the company's focus on cost management led to a 110 basis point expansion in operating margins. This performance coincided with a noticeable recovery in RAC demand starting mid-April and continued strength in the EMPS division. The company plans further price increases, an initial 8% hike already implemented, with another 5% planned, to counteract rising input costs.
RAC Demand Recovers Amid Cost Pressures
The RAC segment, vital for consumer revenue, is seeing a strong recovery following warmer weather from mid-April. Dealer inventory levels are now at a more manageable 45-60 days supply, with a strong summer expected to boost sales. Blue Star, holding a 14.3% market share in RAC, aims to reach 15% through dealer expansion and premium product focus. However, this recovery is happening as manufacturers face significant cost inflation. Raw material prices for commodities like copper, aluminum, and steel have surged, compounded by new efficiency standards set to take effect in January 2026. These factors have led to industry-wide price increases of 5-15%, a trend expected to continue for the next 12-18 months.
EMPS Growth Driven by Data Centers, Faces Margin Squeeze
The Electro-Mechanical Projects (EMPS) segment is a key growth driver, with order inflows up 35% year-on-year in Q4. This growth is fueled by opportunities in data centers, EV battery plants, and manufacturing facilities. India's data center market is expanding rapidly, projected to reach over 4.5 GW by 2030. Blue Star’s EMPS order book stood at Rs 4,664 crore at the end of Q4 FY26. Despite this strong pipeline, project margins face pressure from intense competition and rising material costs. Management anticipates sustainable margins of 7-7.5% for the segment.
Competition and Valuation
Blue Star operates in a highly competitive RAC market. Voltas leads with approximately 19.5-21% market share, followed by Daikin (17.5-18%), LG, and Samsung. Blue Star holds a solid 14.3% share. Competitors often trade at different valuations; for example, Daikin Industries has a P/E ratio of about 21.2, significantly lower than Blue Star's 70-80x P/E. Voltas also has a higher P/E of around 97.74, despite experiencing some profit declines in Q4. Havells India reported strong Q4 profit growth, but this was largely due to investment gains, while its core revenue grew a more modest 5.9% and its margins also faced pressure.