Shares of Blue Star Limited were down 2.10% at ₹1,789.20 in early trade on Thursday after DAM Capital downgraded the stock to ‘Sell’ from ‘Hold’, citing muted earnings growth and weaker RAC demand outlook.
The brokerage noted that Blue Star’s Unitary Products (UCP) segment declined 13% YoY due to a weak summer and elevated channel inventory. While market share rose beyond 14% on account of new SKUs and distribution expansion, the firm expects subdued RAC growth in FY26 due to a soft first half.
Engineering Projects (EMP) saw a strong 36% YoY rise, driven by data centre and factory demand, although railway and metro projects remained sluggish. Margins fell across the board due to adverse mix and negative operating leverage, prompting lower margin guidance of 7–7.5% for EMP and 7–8% for UCP in FY26E.
Despite a 15% revenue CAGR forecast over FY25–27E and long-term RAC tailwinds, DAM Capital believes current valuations—at 45x FY27E overall and 69x for UCP—fully factor in the upside. It has set a revised target price of ₹1,650, implying nearly 10% downside from current levels.
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