AC sales likely to decline 30% in 2020- says Blue Star’s B ThiagarajanSharvari Joshi
Update on the Indian Equity Market:
On Wednesday, NIFTY closed in the green at 9,187 (+2.3%). Top gainers in NIFTY50 were ZEEL (+20.0%), Reliance (+9.8%) and Asian Paints (+5.2%). The top losers were ONGC (-5.2%), VEDL (-2.5%) and L&T (-1.7%). Top sectoral gainers were Media (+6.5%), Auto (+2.5%) and FMCG (+2.5%) and sectoral losers were Realty (-0.8%) and PSU Banks (-0.1%).
Excerpts of an interview with Mr. B Thiagarajan, MD, Blue Star Ltd with CNBC -TV18 dated 22nd April 2020:
- He expects a big decline in the AC segment as he thinks the upcoming summer is going to a tough one.
- He said things are tough and the industry will de-grow by at least 30 per cent compared to the previous year.
- About 45 days ago they were worried whether they will lose sales during the summer season. But things have entirely changed. He thinks they can still salvage the situation by attempting to sell in the month of May and June.
- Room air conditioners are not going to impact the health of the people. Central air conditioning – there are certain solutions which will make people comfortably use the central air conditioning system.
- On the lower end kind of consumer durable products, he feels, the recovery is going to be faster.
Consensus Estimate: (Source: market screener and investing.com websites)
- The closing price of Blue Star Ltd was ₹ 565/- as of 22-April-2020. It traded at 26x/ 22x/ 19x the consensus earnings estimate of ₹ 21.9/ 25.9 /30.4 for FY20E/21E/22E respectively.
- The consensus price target of Blue Star Ltd is ₹ 779/- which trades at 26x the earning estimate of ₹4/-