Motilal Oswal Maintains Neutral Call on Blue Star, Targets Rs 1950

Blue Star Stock Sees 25% Rally on Improving Demand Outlook

Blue Star's stock has experienced a significant surge of over 25% in the last two weeks, driven by an improving demand outlook. This shift is largely attributed to the return of typical seasonal conditions, accompanied by rising temperatures across various regions, following unseasonal rains at the end of March 2026. As a result, room air conditioner (RAC) demand is expected to experience a sharp recovery, particularly in southern and western regions, which started to experience heat from mid-April 2026.

The company is well-prepared to capitalize on this trend change, with available channel inventory, an expanded portfolio of 125 BEE-compliant models, and calibrated price hikes to protect margin. This operational readiness positions Blue Star favorably to benefit from the anticipated increase in RAC demand.

Valuation and Recommendation

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At its current market price, Blue Star trades fairly at a price-to-earnings (P/E) ratio of 54x for FY27 and 43x for FY28 estimates. Our research team's sum-of-the-parts (SoTP) based target price stands at INR1,950. This valuation assumes a price multiple of 45x for Unconsolidated Companies (UCP) and Employee Stock Option Plans (EMPS), and 25x for the Parent Entity's (PES) FY28 earnings per share (EPS). We reiterate a Neutral recommendation for Blue Star.

Comparison of Valuations

Note: The comparison table highlights Blue Star's valuation multiples for FY27 and FY28 estimates.

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