Motilal Oswal Assigns Target Price of Rs 1920 for Neutral Blue Star
Blue Star's Fourth Quarter Performance Falls Short of Expectations
Blue Star, a prominent Indian company, has reported its financial results for the fourth quarter of fiscal year 2026. The company's revenue for the quarter stood at INR 40.7 billion, marking a marginal increase of approximately 1% year-over-year (YoY). This represents a slight miss of around 7% compared to expectations.
Despite the modest revenue growth, Blue Star's earnings before interest, taxes, depreciation, and amortization (EBITDA) saw a significant increase of around 17% YoY, reaching INR 3.3 billion. This improvement was primarily driven by cost rationalization measures and the deferral of certain discretionary costs. The operating profit margin (OPM) expanded by 1.1 percentage points YoY, reaching 8.0%, which is a notable increase of 1.2 percentage points compared to the research firm's estimates.
The company's adjusted profit after tax (PAT) witnessed a growth of around 11% YoY, reaching INR 2.1 billion. This increase was primarily fueled by higher other income and a lower estimated effective tax rate (ETR). The adjusted PAT growth outperformed the research firm's estimates by a significant margin of 27%.
Valuation and Outlook
As of the current market price (CMP), Blue Star trades at a price-to-earnings ratio (PE) of 51x and 40x for fiscal years 2027 and 2028, respectively. The research firm's sum-of-the-parts (SoTP) valuation model assigns a target price of INR 1,920 to the company, based on valuations of its underlying business segments.
| Financial Metric | Actual (Q4 FY26) | Estimated (Q4 FY26) | Difference |
|---|---|---|---|
| Revenue (INR billion) | 40.7 | 42.3 | -7% |
| EBITDA (INR billion) | 3.3 | 2.8 | +9% |
| OPM (%) | 8.0 | 6.8 | +1.2pp |
| Adj. PAT (INR billion) | 2.1 | 1.7 | +27% |
The research firm has maintained a neutral recommendation for Blue Star, citing the company's current valuation and outlook.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Investor Takeaway
Motilal Oswal assigns a target price of Rs 1920 for Blue Star with a Neutral rating.
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