Prabhudas Lilladher has initiated coverage on Blue Star with a buy rating and a target price of Rs 1873, citing strong earnings visibility, improving profitability, and leadership in the HVAC industry, with expected revenue growth of 18.9% to 24.9% CAGR over FY26-28E.

Blue Star's management indicated that changes to BEE norms and a sharp rise in commodity prices have pushed production costs up by around 13%.

Blue Star is focused on exporting commercial AC systems and acknowledges the challenges of competing with established global brands and Chinese manufacturers in the European market.

Blue Star's Managing Director B. Thiagarajan reported a 2% to 2.5% drop in operating margins due to rising input costs, despite a strong summer season with 35% volume growth. The company has revised its full-year operating margin guidance down to 7.5% for FY27 and is focusing on data centre cooling as a long-term growth driver, targeting 4,000 crore in revenue from this segment by FY29.

Insights from BlueStar's Managing Director reveal current market trends and strategic directions.

Blue Star anticipates that the booming data center ecosystem will contribute nearly ₹4,000 crore in revenue by FY29, representing almost 20% of its overall business, driven by investments in AI, cloud, and digital infrastructure. However, the company faces margin pressures due to rising costs of materials such as copper, steel, and aluminum.