Blue Star shares fall after core UCP business miss in Q3

Shares of Blue Star Ltd. are trading lower on Friday, January 30, after the company reported third quarter earnings that came in below Street expectations, weighed down by weaker revenue growth in key segments and a drop in profitability due to the impact of the new labour codes.

In Q3, Blue Star's consolidated revenue rose 4% YoY to ₹2,925 crore, compared with ₹2,807 crore a year ago, but missed estimates of ₹3,057 crore.

Profit fell by 39% YoY to ₹81 crore, below estimates, largely due to a ₹56 crore impact from the new labour code.

Gross margins declined 160 basis points YoY to 22.8%. EBITDA increased 5% YoY to ₹221 crore, broadly in line with expectations, with the EBITDA margin remaining flat at 7.5%.

Segment wise, revenue growth in both the Unitary Cooling Products and Electro Mechanical Projects businesses came in lower than expected.

UCP revenue declined 1% YoY against expectations of around 5% growth, though PBIT margin improved by 40 basis points to 8.4%. The EMP segment saw revenue growth of 9% YoY, but PBIT margin declined sharply by 80 basis points to 6.8%, well below estimates.

Professional electronics revenue fell 7% YoY, even as margins improved by 140 basis points to 9.1%.

For the nine months ended FY26, consolidated revenue rose 5% YoY to ₹8,330 crore, while EBITDA was largely flat at ₹604 crore. EBITDA margin for the period slipped 20 basis points to 7.3%. PAT declined 24% YoY to ₹300 crore.

Brokerage firm Jefferies maintained a 'Hold' rating on Blue Star with a price target of ₹2,000.

The brokerage said that operational performance was better than its expectations, with EBITDA up 5% YoY and operating margins at 7.5%, higher than its estimate of 6.7%.

However, reported PAT missed sharply due to the exceptional item linked to the new labour codes. Excluding this one off impact, Jefferies said adjusted PAT could have grown around 2% YoY.

It added that consolidated sales growth was broadly in line with expectations, with EMP project sales rising 9% YoY, while cooling products revenue saw a marginal 1% decline.

Shares of Blue Star ended Thursday's session 1.62% higher at ₹1,729.