Commercial Refrigeration Expected To Recover In H2FY25 & EMP Biz Expected To Grow At 20%: Blue Star

Summary

In an insightful discussion, Mr. B. Thyagarajan, MD of Blue Star, shares the company's optimistic outlook for the year ahead. Despite concerns about consumer spending, the company saw a 30% growth in sales during the festive season, driven by stable pricing, consumer financing, and strong market demand. Blue Star expects steady market share growth and 25-30% revenue growth, primarily in the room air conditioning segment. The company is expanding into the US and European markets, focusing on high-energy efficiency products. While challenges remain in commercial refrigeration, Blue Star anticipates continued growth across its diverse business segments.

Takeaways

• 😀 Despite concerns about consumer spending, Blue Star's room AC segment has seen robust growth, with a 30% increase during the festive season.
• 😀 Blue Star attributes its growth to stable pricing, easy consumer financing, and energy-efficient products, which have helped maintain strong demand.
• 😀 The company has gained 100 basis points of market share in Q2, and expects a further 50 basis points increase in Q3 and Q4, targeting a total market share of 14.25% by year-end.
• 😀 Consumer financing plays a significant role, with nearly 50% of festive season sales made through finance schemes, helping make air conditioners more affordable for customers.
• 😀 Power consumption concerns have been alleviated due to energy-efficient models, which are now much more cost-effective than previous models or even mobile phones for daily use.
• 😀 Despite global market concerns, Blue Star is optimistic about the potential for growth, with projections of a 25-30% growth in the room AC segment for the full year.
• 😀 Blue Star is expanding its export footprint, particularly in the U.S. and Europe, focusing on high-energy-efficiency and decarbonization products for international markets.
• 😀 The European market for air conditioning has slowed down, but Blue Star is taking this opportunity to refine its offerings and develop partnerships with OEM customers.
• 😀 In the commercial refrigeration segment, Blue Star has experienced a slowdown but expects stabilization. Full-year growth in this segment is projected at just 10%.
• 😀 Blue Star's overall business is expected to grow by around 20% for the year, driven by strong performance in room AC, commercial air conditioning, and electromechanical projects.

Q & A

How did Blue Star perform during the festive season?

Blue Star saw a 30% growth during the festive season, which was higher than expected, despite the market challenges. This growth was driven by strong demand and stable pricing.

What factors are driving Blue Star’s growth in the room air conditioner segment?

Key drivers of growth in the room air conditioner segment include stable pricing, accessible consumer finance, energy-efficient products, and government schemes that lower power bills for consumers.

What is Blue Star’s market share outlook for the year?

Blue Star expects to gain 50 basis points in market share, moving from 13.75% to around 14.25%. The company's long-term goal is to reach a 15% market share by FY25.

How does Blue Star plan to manage competition in the room AC market?

While Blue Star anticipates intense competition in Q3 and Q4, it plans to continue growing market share by focusing on product quality, stable pricing, and expanding consumer financing options.

What role does consumer finance play in Blue Star’s sales strategy?

Consumer finance plays a significant role, with approximately 50% of Blue Star's festive season sales coming from financing options. This helps make their products more accessible to a wider consumer base.

What is Blue Star’s expectation for its commercial refrigeration segment?

Blue Star's commercial refrigeration segment has been recovering after setbacks in Q1 and Q2. It is expected to grow by about 10% for the full year due to regulatory changes and the introduction of new products like water coolers.

How is Blue Star performing in the international market?

Blue Star has been expanding its footprint in Europe and the Americas, focusing on providing high-energy-efficient and decarbonized products. While the European market is currently slow, Blue Star is using this time to perfect its products and build relationships with new OEM customers.

How does Blue Star view the future of the European market?

Blue Star believes the European market will take 4-5 more quarters to gain momentum. They are not in a hurry, focusing on product quality and cost efficiency as they look to replace Chinese vendors.

What is the growth outlook for Blue Star’s business in the next year?

Blue Star anticipates overall business growth of 25-30% for the year, driven largely by the strong performance of the room AC segment. Other segments such as commercial air conditioning and electromechanical projects are expected to grow at a slower pace.

What are Blue Star’s projections for its commercial air conditioning business?

Blue Star expects its commercial air conditioning business, particularly for large spaces, to grow by over 20% this year, supported by a strong order book and robust demand.