Anand Rathi Picks Mid Cap Stock From Consumer Durables Sector, Gives Investment Call

Anand Rathi has picked mid-cap stock from consumer durables sector, Blue Star Ltd and assigned buy rating with a target price of Rs 1517 apiece. The current market price of the stock is Rs 1223 apiece. If you buy Blue Star Ltd at the current market price, you can potentially get 24% return.

According to Anand Rathi, "Blue Star's return ratios are expected to expand in FY23 (H1 FY23 net income Rs1.17bn, FY22 net income Rs1.67), unlike its peers in durable and FMEG. Check key takeaways below:

1. Blue Star Stock Performance

The last trading price of the stock is Rs 1223 apiece with marginal intraday gain of 0.23%. The 52-week high of the stock is Rs 1271 apiece and 52-week low is Rs 839 apiece, respectively.

The company has a market capitalisation of Rs 11,787 crore. The stock has jumped nearly 70% in last 5-years, 56% in last 3-years, and 32% in last 1-year. In last 3-months, the stock has jumped 13%.

2. Growth Supported By All Verticals

Q2 FY23 revenue rose 27% YoY, backed by robust growth across all verticals. Revenue booking at projects rose 33% y/y to Rs 9.6bn. Growth in UCPs was 15% y/y, as Q2 is a lean quarter for this category. . Professional electronics' revenue rose 50% y/y to Rs 924m as demand for medical diagnostic equipment and for non-destructive testing was strong.

3. Valuation & Risks

Valuation: According to Anand Rathi, "Post- Q2 FY23, our FY23e/FY24e revenues have risen 6%/5%. However, our net income estimates are largely intact considering the competitive market context, which can constrain the pace of margin expansion. At the CMP, the stock trades at 34x/26x the FY24e/FY25e EPS of Rs36/Rs47. We maintain our Buy rating with a TP of Rs 1,517, 32x FY25e EPS of Rs 47 (earlier Rs1,352, 38x FY24e EPS of Rs35.6)."

Risks: Inability to gain market share and reduce capital employed in UCP is a risk to our earnings. Significant delays in project execution could impact project margins.

4. Blue Star About

Blue Star is India's leading air conditioning and commercial refrigeration company, with an annual revenue of over ₹ 6045 crores (778 million USD), a network of 31 offices, 5 modern manufacturing facilities and two new state-of-the-art facilities being set up, 2621 employees, and 3950 channel partners.

The company has 7500 stores for room ACs, packaged air conditioners, chillers, cold rooms as well as refrigeration products and systems, along with 1172 service associates reaching out to customers in over 900 towns, according to its official website.

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.