Blue Star (BLUESTARCO)

FairStock Score: 42/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 2/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• Five-year revenue CAGR of 22.93% reflects strong structural demand for cooling products in India.
• ROCE of 26.20% and ROE of 16.13% indicate efficient capital deployment.
• Low debt-to-equity of 0.33 and Altman Z-score of 5.12 provide a robust financial buffer.
• Piotroski F-Score of 7/9 suggests generally sound operating fundamentals.
• Established brand with promotor holding of 36.48% in a duopolistic-ish AC market.

Concerns

• Valuation is extreme: P/E of 74.68, EV/EBITDA of 33.29, and price far above DCF value of ₹89.40 and Graham Number of ₹289.97.
• Profit after tax fell 11.44% despite sales growth; latest quarterly net margin is just 2.77% (₹81 Cr profit on ₹2,925 Cr sales).
• Free cash flow of ₹225 Cr equates to a paltry ~0.56% yield against the ₹39,914 Cr market cap.
• Promoter holding of 36.48% is moderate, leaving scope for governance drift in competitive markets.

AI Analysis

Let me examine Blue Star through the lens of business quality and price. The company has impressive historical momentum: a five-year revenue CAGR of 22.93%, a return on capital employed of 26.20%, and a return on equity of 16.13%. That suggests a reasonably efficient operator with a valuable brand in India's growing air-conditioning and refrigeration market. The balance sheet is also conservative – debt/equity of only 0.33 and an Altman Z-score of 5.12, which tells me bankruptcy risk is low. The 7/9 Piotroski score adds to the picture of acceptable financial health. But Graham taught me that a great business can still be a bad investment if you overpay. At ₹1,829.60, the P/E ratio is 74.68 and EV/EBITDA is 33.29. The DCF value is just ₹89.40, while the Graham Number is ₹289.97 – giving me a margin of safety of negative 569%. That is not investing; that is speculation. The latest quarter adds caution: net profit of ₹81 Cr on sales of ₹2,925 Cr is a thin 2.77% margin, and profit declined 11.44% year-on-year even as sales grew. Free cash flow of ₹225 Cr is less than 0.6% of the ₹39,914 Cr market cap. This is a quality business with a strong moat in a hot sector, but Mr. Market is pricing in perfection. As a value investor, I need a margin of safety. I would wait for a far more reasonable price before considering Blue Star for my portfolio.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer