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Blue Star-RU3QFY2011-020211

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					                                                                                           3QFY2011 Result Update | Capital Goods
                                                                                                                         February 2, 2011



 Blue Star                                                                                     BUY
                                                                                               CMP                                    `341
 Performance Highlights                                                                        Target Price                           `477
  Y/E March (` cr)        3QFY11       2QFY11       % chg (qoq)   3QFY10     % chg (yoy)       Investment Period               12 Months
  Net sales                    613         695           (11.7)       589           4.2
                                                                                              Stock Info
  EBITDA                        47          67           (29.7)        58         (18.1)
                                                                                              Sector                         Cons. Durables
  EBITDA (%)                   7.7          9.7        (197)bp        9.8       (210)bp
                                                                                              Market Cap (` cr)                        3,066
  PAT                           22          39           (42.1)        42         (47.2)
                                                                                              Beta                                       0.8
  Source: Company, Angel Research
                                                                                              52 Week High / Low                     554/328
 For 3QFY2011, Blue Star reported a weak performance. The top line increased                  Avg. Daily Volume                       21,407
 by mere 4.2% yoy to `613cr (`589cr), against our expectation of `705cr. OPM
                                                                                              Face Value (`)                               2
 declined by 210bp yoy to 7.7% (9.8%), again much below our estimates.
                                                                                              BSE Sensex                              18,090
 Consequently, PAT declined by 47.2% yoy to `22cr (`42cr). During the quarter,
 the company slowed down the pace of revenue billing, given its high debtor                   Nifty                                    5,432
 position. This was the primary reason for the company’s lower-than-expected                  Reuters Code                         BLUS.BO
 performance in 3QFY2011. During the quarter, the business environment was                    Bloomberg Code                      BLSTR@IN
 disappointing as well. The expected pick-up in demand from the commercial real
 estate market did not materialise during this quarter and seems to have been
 delayed by a couple of quarters. Owing to weaker-than-anticipated business                   Shareholding Pattern (%)
 outlook, we have revised our top-line estimates for FY2011 and FY2012                        Promoters                                40.1
 downwards by 7.1% and 9.9% to `2,938cr and `3,594cr, respectively, and PAT                   MF / Banks / Indian Fls                  16.9
 estimates by 19.5% and 20.0% to `173cr and `226cr, respectively. We maintain                 FII / NRIs / OCBs                         9.7
 our Buy recommendation on the stock                                                          Indian Public / Others                   33.3
 Poor order execution: During 3QFY2011, order billing took a hit as the company
 was bogged down by a large number of debtors and the business scenario did
 not pick up as expected. Consequently, order inflows were also low at `682cr                 Abs. (%)                  3m      1yr      3yr
 (`660cr), while the order book stood at `2,703cr, compared to `1,998cr at the                Sensex               (11.1) 11.9          (0.8)
 end of 2QFY2011.                                                                             Blue Star            (26.3)      8.1     (31.3)

 Outlook and valuation: The pick-up in demand from the key markets of the
 company still remains elusive. However, the business scenario is expected to
 improve in FY2012E. Growth in the cooling products business also remains
 robust. Overall, we expect the company to post a 19.3% CAGR over FY2010–12E
 in the top line to `3,594cr, while PAT is estimated to grow at a 3.3% CAGR to
 `226cr. We maintain Buy on the stock with a revised Target Price of `477 (`596).
 Key financials (Consolidated)
 Y/E March (` cr)                       FY2009       FY2010E      FY2011E    FY2012E
 Net sales                                2,503         2,525       2,938       3,594
 % chg                                     12.7            0.9       16.4         22.3
 Net profit                                 188           212         173          226
 % chg                                       5.7         15.0       (18.2)        30.6
 EBITDA (%)                                10.4          10.9         9.4          9.8
 EPS (`)                                   20.5          23.5        19.2         25.1
 P/E (x)                                   16.7          14.5        17.7         13.6
 P/BV (x)                                    8.4           6.2        5.6          4.9
 RoE (%)                                   59.5          49.3        33.4         38.7
 RoCE (%)                                  67.3          53.8        43.6         48.7        Jai Sharda
 EV/Sales (x)                                1.2           1.2        1.0          0.9        +91 22 3935 7800 Ext: 6810
 EV/EBITDA (x)                             11.9          11.1        11.2          8.8        jai.sharda@angelbroking.com
 Source: Company, Angel Research

Please refer to important disclosures at the end of this report                                                                            1
                                                                                  Blue Star | 3QFY2011 Result Update




Exhibit 1: 3QFY2011 performance
Y/E March (` cr)                  3QFY11    2QFY11     % chg (qoq)   3QFY10    % chg (yoy)   9MFY2011     9MFY2010     % chg
Net Sales                          613.4      694.8         (11.7)    588.7           4.2      1,973.0       1,674.7    17.8
Consumption of RM                  464.1      530.7         (12.5)    449.1           3.4      1,498.8       1,237.9    21.1
(% of Sales)                        75.7        76.4                   76.3                       76.0          73.9
Staff Costs                         52.0        50.8          2.3      43.0          20.9       150.1         136.8      9.7
(% of Sales)                         8.5         7.3                    7.3                        7.6           8.2
Other Expenses                      50.1        46.1          8.7      39.0          28.5       148.5         112.8     31.7
(% of Sales)                         8.2         6.6                    6.6                        7.5           6.7
Total Expenditure                  566.1      627.5          (9.8)    531.0           6.6      1,797.3       1,487.5    20.8
Operating Profit                    47.3        67.2        (29.7)     57.8         (18.1)      175.7         187.2     (6.2)
OPM                                  7.7         9.7                    9.8                        8.9         11.2
Interest                             7.9         4.9         62.4       2.3         248.5        14.8            6.0   148.0
Depreciation                         8.0         7.9          1.9       8.8          (8.2)       23.5          25.6     (8.3)
Other Income                         0.0         1.6        (98.1)      0.3         (90.0)         1.7           4.0   (57.0)
PBT (excl. Extr. Items)             31.4        56.1        (44.1)     47.0         (33.3)      139.1         159.7    (12.8)
Extr. Income/(Expense)                 -           -                    8.7                        0.4         14.0
PBT (incl. Extr. Items)             31.4        56.1        (44.1)     55.8         (43.7)      139.6         173.6    (19.6)
(% of Sales)                         5.1         8.1                    9.5                        7.1          10.4
Provision for Taxation               9.0        17.4        (48.4)     13.4         (32.9)       41.4          40.7      1.9
(% of PBT)                          28.7        31.1                   24.1                       29.7          23.4
Reported PAT                        22.4        38.6        (42.1)     42.3         (47.2)       98.1         132.9    (26.2)
PATM                                 3.6         5.6                    7.2                        5.0           7.9
Equity shares (cr)                   9.0         9.0                    9.0                        9.0           9.0
EPS (`)                              2.5         4.3        (42.1)      4.7         (47.2)       10.9          14.8    (26.2)
Adjusted PAT                        22.4        38.6        (42.1)     33.6         (33.5)       97.7         119.0    (17.9)
Source: Company, Angel Research

                                           Segment-wise performance

                                           The electromechanical projects and packaged air-conditioning   systems (EMPPACS)
                                           segment of the company posted a 4.9% yoy decline in the        top line to `434cr
                                           (`457cr). The segment was hit by weak order execution, as      well as a delay in
                                           demand pick-up. As a result of lower revenue, EBIT margins     declined by 411bp
                                           yoy to 6.7% (10.8%).

                                           The cooling products segment performed well on the sales front, posting an
                                           increase of 34.8% yoy to `128cr (`95cr). The segment witnessed strong demand in
                                           the room air-conditioner market. However, due to a substantial increase in input
                                           costs, EBIT margins for this segment declined by 76bp to 7.9% (8.7%).

                                           The professional electronics and industrial systems (PEIS) segment grew by 29.3%
                                           during the quarter to `45cr (`35cr). EBIT margins for the segment came in at
                                           26.1% (25.3%), an improvement of 79bp yoy.




February 2, 2011                                                                                                            2
                                                                             Blue Star | 3QFY2011 Result Update




                   Exhibit 2: Segment-wise performance
                   Y/E March (` cr)         3QFY2011 2QFY2011                      3QFY2010 % chg (qoq)                   % chg (yoy)
                   Total revenue
                   A) EMPPACS                         434.2        470.5                 456.7               (7.7)              (4.9)
                   B) Cooling products                127.8        143.9                  94.8              (11.2)              34.8
                   C) PEIS                             44.8         67.4                  34.6              (33.6)              29.3
                   Total                              606.8        681.8                 586.2              (11.0)               3.5
                   Net sales                          606.8        681.8                 586.2              (11.0)               3.5
                   EBIT
                   A) EMPPACS                          29.2         44.4                  49.5              (34.2)             (41.0)
                   B) Cooling products                 10.1         16.5                   8.2              (38.5)              23.1
                   C) PEIS                             11.7         16.3                   8.8              (28.2)              33.4
                   EBIT margin (%)
                   A) EMPPACS                           6.7             9.4               10.8        (272bp)                (411bp)
                   B) Cooling products                  7.9         11.5                   8.7        (352bp)                 (76bp)
                   C) PEIS                             26.1         24.1                  25.3          194bp                  79bp
                   Source: Company, Angel Research

                   Sales growth dips sharply in 3QFY2011: The company, which has been posting
                   fairly robust growth of around 20.0% over the past few quarters, witnessed a dip in
                   its top-line growth on the back of weak demand outlook. This scenario is expected
                   to remain challenging over 4QFY2011 as well, post which the business situation is
                   expected to improve.

                   Exhibit 3: Sales trend
                            1000                                                                                             30.0
                                                                                875
                             900                                                                                             25.0
                             800   714                                                             695                       20.0
                                                                                          665
                             700                                   596                                          613          15.0
                                            540           564
                             600                                                                                             10.0
                   (` cr)




                                                                                                                                     (%)
                             500                                                                                             5.0
                             400                                                                                             0.0
                             300                                                                                             -5.0
                             200                                                                                             -10.0
                             100                                                                                             -15.0
                               0                                                                                             -20.0
                                   4QFY09


                                             1QFY10


                                                          2QFY10


                                                                    3QFY10


                                                                                4QFY10


                                                                                          1QFY11


                                                                                                   2QFY11


                                                                                                                 3QFY11




                                                          Sales (LHS)              yoy Growth (RHS)

                   Source: Company, Angel Research

                   OPM dips on weak top line: Blue Star reported a 210bp yoy fall in the OPM in
                   3QFY2011, mainly because of operating leverage on low sales. High input costs
                   also put pressure on the margins. Going ahead, as sales increase, we expect OPM
                   to rise from the current levels.




February 2, 2011                                                                                                                      3
                                                                                       Blue Star | 3QFY2011 Result Update




                   Exhibit 4: OPM trend

                            120                                                                                                                          16.0
                                                                                                                                                         14.0
                            100
                                                                                                                                                         12.0
                             80
                                                                                                                                                         10.0




                   (` cr)
                             60                                                                                                                          8.0




                                                                                                                                                                  (%)
                                                                                                                                                         6.0
                             40
                                                                                                                                                         4.0
                             20
                                                                                                                                                         2.0
                             0                                                                                                                           0.0




                                    4QFY09



                                              1QFY10



                                                           2QFY10



                                                                             3QFY10



                                                                                               4QFY10



                                                                                                                 1QFY11



                                                                                                                                   2QFY11



                                                                                                                                                3QFY11
                                                                    EBITDA (LHS)                           OPM (RHS)

                   Source: Company, Angel Research

                   PAT dips 47.2% yoy: Owing to weak sales growth and a decline in margins, the
                   company reported a sharp 47.2% yoy decline in PAT. This is the lowest quarterly
                   profit that the company has posted over the past eight quarters. Going ahead, PAT
                   is expected to rise from these levels.


                   Exhibit 5: PAT trend

                            90
                            80
                            70
                            60
                            50
                   (` cr)




                            40
                            30
                            20
                            10
                             0
                                     4QFY09



                                                  1QFY10



                                                                    2QFY10



                                                                                      3QFY10



                                                                                                        4QFY10



                                                                                                                          1QFY11



                                                                                                                                            2QFY11



                                                                                                                                                         3QFY11




                   Source: Company, Angel Research


                   Management call – Key takeaways

                            The execution is moving well in hotels and hospitals, while it is still sluggish in
                            the infrastructure and commercial real estate space.

                            The order book execution period is around 14–15 months, with the period
                            stable at this level.

                            Management expects the top line in 4QFY2011 to remain flat yoy, as it
                            continues to remain cautious on project completions, keeping in view the
                            current debtor position. Post that, it is expected that the EMPPACS segment
                            would post growth in excess of 15.0% in FY2012E.




February 2, 2011                                                                                                                                                   4
                                                             Blue Star | 3QFY2011 Result Update



                       The company has raised the minimum margins and payment schedule
                       conditions to bid for projects since October 2010, although the market is
                       witnessing quite aggressive pricing from competitors.

                       DS Gupta Construction is witnessing strong order inflows. Management
                       expects the company to enter FY2012 with an order backlog of `250cr.



                   Investment arguments
                   Substantial demand for centralised air-conditioning, cold storage to drive future
                   growth: The surge in demand for commercial space and increasing corporate and
                   government thrust for setting up an efficient cold chain infrastructure in the country
                   are set to trigger demand for centralised air-conditioning and cold storage systems
                   in India. BSL's cold storage division too has high growth potential with the
                   aggregate cost of providing a nation-wide cold chain infrastructure estimated to
                   cost more than `15,000cr.

                   To maintain leadership position owing to superior execution skills: BSL's strength
                   lies in its superior execution skills compared to competition. The company, with
                   30% market share in the central air-conditioning system segment, is a preferred
                   vendor with institutional clients. The company's list of national account customers
                   provides repetitive business.

                   Present in high-margin segments: BSL is a diversified player in the air-conditioning
                   industry and is focused on high-margin segments, including commercial
                   refrigeration, cold storage and central air-conditioning. The company has
                   improved its margins following an increase in the average ticket size of orders.
                   The easing of pricing pressures is also expected to improve the company's margins
                   going ahead.


                   Outlook and valuation

                   The expected pick-up in demand from the commercial real estate market seems to
                   have been delayed by a couple of quarters. Consequently, the company is
                   currently witnessing a more challenging environment than that anticipated earlier,
                   as reflected in weaker-than-expected 3QFY2011 numbers. However, things are
                   expected to improve in FY2012, when demand picks up. Moreover, the cooling
                   products business of the company continues to perform well. On account of
                   subdued numbers in 3QFY2011 and relatively weaker business outlook, we have
                   revised our top-line estimates for FY2011 and FY2012 downwards by 7.1% and
                   9.9% to `2,938cr and `3,594cr, respectively, and PAT estimates by 19.5% and
                   20.0% to `173cr and `226cr, respectively.

                   Overall, we expect the company to report a 19.3% CAGR over FY2010–12E in its
                   top line to `3,594cr, while PAT is estimated to grow at a 3.3% CAGR to `226cr.
                   At the CMP, the stock is trading at 17.7x and 13.6x its FY2011E and FY2012E EPS.
                   We maintain Buy on the stock with a revised Target Price of `477 (`596).




February 2, 2011                                                                                       5
                                                                                                   Blue Star | 3QFY2011 Result Update




                                               Exhibit 6: 3QFY2011 results – Actual v/s estimated
                                               (` cr)                                              Actual         Estimated             Difference (%)
                                               Sales                                                 695                 705                       (1.4)
                                               EBITDA                                                   47                74                      (36.1)
                                               OPM (%)                                               7.7                 10.5                    (279)bp
                                               PAT                                                      22                46                      (51.8)
                                               Source: Company, Angel Research




                                               Exhibit 7: Revised estimates
                                               (` cr)                     Old                         New                             % chg
                                                                FY2011E FY2012E              FY2011E         FY2012E        FY2011E           FY2012E
                                               Sales               3,163        3,989              2,938        3,594             (7.1)            (9.9)
                                               EBITDA                   319          422            276          352             (13.6)           (16.7)
                                               EBITDA (%)           10.1            10.6             9.4          9.8
                                               PAT                      215          282            173          226             (19.5)           (20.0)
                                               EPS (`)              23.9            31.4            19.2         25.1            (19.5)           (20.0)
                                               Source: Angel Research




Exhibit 8: Key assumptions
                                               FY2011E        FY2012E           Remarks
EMPPACS – Contribution to sales (%)                  68.9         67.6          High expected growth on account of demand revival
Cooling products – Contribution to sales (%)         24.3         25.8          Strong growth momentum to continue
PEIS – Contribution to sales (%)                        6.2        6.1          –
OPM (%)                                                 9.4        9.8          OPM increases on the back of easing raw-material prices
Source: Angel Research




                                               Exhibit 9: Peer comparison
                                               Company            Mcap          CMP           P/E (x)              P/BV (x)                RoE (%)
                                                                   (` cr)           (`)    FY11E      FY12E      FY11E     FY12E       FY11E       FY12E
                                               Blue Star          3,066         341         17.7         13.6      5.6          4.9       33.4      38.7
                                               Voltas             6,217       187.9         16.0         13.3      4.5          3.6       31.2      29.5
                                               Source: Company, Bloomberg, Angel Research




February 2, 2011                                                                                                                                       6
                                                                          Blue Star | 3QFY2011 Result Update




                   Exhibit 10: One year forward P/E band
                                     600

                                     500




                   Share Price (`)
                                     400

                                     300

                                     200

                                     100

                                      0
                                       Apr-04     Apr-05   Apr-06    Apr-07     Apr-08    Apr-09    Apr-10
                                                Price      8x       11x        14x       17x       20x

                   Source: Company, Bloomberg, Angel Research




February 2, 2011                                                                                             7
                                                          Blue Star | 3QFY2011 Result Update




                   Profit and Loss Statement
                   Y/E March (` cr)               FY07      FY08   FY09    FY10    FY11E    FY12E
                   Gross sales                    1,595    2,222   2,552   2,558   2,938    3,594
                   Less: Excise duty                  -        -    49.7    32.6        -       -
                   Net Sales                      1,595    2,222   2,503   2,525   2,938    3,594
                    % chg                          36.2     39.3    12.7     0.9    16.4     22.3
                   Total Expenditure              1,484    1,999   2,243   2,250   2,663    3,243
                   Net Raw Materials              1,243    1,691   1,874   1,882   2,230    2,735
                   Other Mfg costs                  49        68     50      50       92     112
                   Personnel                       117       145    182     185     214      244
                   Other                            75        95    136     133     126      151
                   EBITDA                          110       223    260     275     276      352
                    % chg                          33.2    102.4    16.4     5.8     0.4     27.5
                    (% of Net Sales)                6.9     10.0    10.4    10.9     9.4      9.8
                   Depreciation& Amortisation       21        22     26      35       35      38
                   EBIT                             89       201    234     240     241      313
                    % chg                          33.7    125.2    16.3     2.7     0.2     30.2
                    (% of Net Sales)                5.6      9.0     9.3     9.5     8.2      8.7
                   Interest & other Charges         10         8     10       8       23      24
                   Other Income                     13        49     22      45       16      16
                    (% of PBT)                     13.9     20.0     8.9    16.3     6.9      5.3
                   Recurring PBT                    93       242    246     277     234      305
                    % chg                          34.1    161.5     1.5    12.6   (15.5)    30.6
                    % of Income                     5.8     10.9     9.8    11.0     8.0      8.5
                   Extraordinary Expense/(Inc.)      1        25       -       -        -       -
                   PBT (reported)                   92       217    246     277     234      305
                   Tax                              21        68     58      65       61      79
                    (% of PBT)                     23.3     31.3    23.6    23.5    26.0     26.0
                   PAT (reported)                   70       149    188     211     173      226
                   ADJ. PAT                         70       149    188     211     173      226
                    % chg                          43.0    111.7    26.0    12.7   (18.2)    30.6
                    (% of Net Sales)                4.4      6.7     7.5     8.4     5.9      6.3
                   Basic EPS (`)                    7.9     19.4    20.5    23.5    19.2     25.1
                   Fully Diluted EPS (`)            7.9     19.4    20.5    23.5    19.2     25.1
                    % chg                          45.6    144.6     5.7    15.0   (18.2)    30.6




February 2, 2011                                                                                8
                                                     Blue Star | 3QFY2011 Result Update




                   Balance Sheet
                   Y/E March (` cr)                FY07   FY08   FY09    FY10    FY11E   FY12E
                    SOURCES OF FUNDS
                    Equity Share Capital            18     18      18      18      18      18
                    Reserves& Surplus              195    246     349     474     527     605
                    Shareholders’ Funds            213    264     367     492     545     623
                    Total Loans                     89     37      24       9      59      59
                    Deferred Tax Liability (Net)     7      4       1      (1)       -       -
                    Total Liabilities              309    304     391     499     604     682
                    APPLICATION OF FUNDS
                    Gross Block                    231    273     333     351     391     481
                    Less: Acc. Depreciation        117    135     145     180     215     253
                    Net Block                      114    138     188     171     176     227
                    Capital Work-in-Progress         2     18      25      28      27      29
                    Investments                      5      5       4       4       4       4
                    Current Assets                 733 1,034     1,149   1,393   1,590   1,860
                       Cash                          5      3       6      13      68      44
                       Loans & Advances            169    257     293     132     309     323
                       Inventories                 209    290     207     258     309     386
                       Debtors                     351    484     643     628     904    1,106
                       Other                          -      -       -    361        -       -
                    Current liabilities            548    892     975    1,097   1,194   1,438
                    Net Current Assets             184    142     174     296     396     422
                    Mis. Exp. not written off        2      1       1        -       -       -
                    Total Assets                   309    304     391     499     604     682




February 2, 2011                                                                             9
                                                        Blue Star | 3QFY2011 Result Update




                   Cash Flow Statement
                   Y/E March (` cr)                   FY07   FY08   FY09     FY10    FY11E   FY12E
                    Profit before tax                  93    242     242      277     234     305
                    Depreciation                       21     22       26      35      35      38
                    (Inc.)/ Dec. in Working Capital   (41)    41      (29)   (114)    (46)    (50)
                    Less: Other income                 13     49       22      45      16      16
                    Direct taxes paid                  21     68       58      65      61      79
                    Cash Flow from Operations          38    188     159       87     146     198
                    (Inc.)/ Dec. in Fixed Assets      (24)   (57)     (67)    (22)    (39)    (91)
                    (Inc.)/ Dec. in Investments        (0)     1        0       0        -       -
                    Other income                       13     49       22      45      16      16
                    Cash Flow from Investing          (12)    (8)     (45)     24     (23)    (75)
                    Issue of Equity                      -      -        -       -       -       -
                    Inc./(Dec.) in loans               13    (53)     (13)    (15)     50        -
                    Dividend Paid (Incl. Tax)          31     74       74      84     126     147
                    Others                             (9) (55.8)   (24.7)   (4.3)     7.9     0.0
                    Cash Flow from Financing          (27) (182)    (111)    (103)    (68)   (147)
                    Inc./(Dec.) in Cash                  -    (2)       3       8      55     (25)
                    Opening Cash balances               5      5        3       6      13      68
                    Closing Cash balances               5      3        6      13      68      44




February 2, 2011                                                                                10
                                                               Blue Star | 3QFY2011 Result Update




                   Key Ratios
                   Y/E March                                 FY07 FY08    FY09   FY10   FY11E   FY12E
                    Valuation Ratio (x)
                    P/E (on FDEPS)                           43.1 17.6    16.7   14.5    17.7    13.6
                    P/E (on basic, reported EPS)             43.1 17.6    16.7   14.5    17.7    13.6
                    P/CEPS                                   33.3 15.6    14.6   12.5    14.7    11.6
                    P/BV                                     14.4 11.6     8.4    6.2     5.6     4.9
                    Dividend yield (%)                        0.9   2.1    2.1    2.3     3.5     4.1
                    Market cap. / Sales                       1.9   1.4    1.2    1.2     1.0     0.9
                    EV/Sales                                  2.0   1.4    1.2    1.2     1.0     0.9
                    EV/EBITDA                                28.6 13.9    11.9   11.1    11.2     8.8
                    EV / Total Assets                        10.2 10.2     7.9    6.1     5.1     4.5
                    Per Share Data (Rs)
                    EPS (Basic)                               7.9 19.4    20.5   23.5    19.2    25.1
                    EPS (fully diluted)                       7.9 19.4    20.5   23.5    19.2    25.1
                    Cash EPS                                 10.2 21.8    23.3   27.4    23.1    29.4
                    DPS                                       3.0   7.0    7.0    8.0    12.0    14.0
                    Book Value                               23.7 29.3    40.8   54.7    60.6    69.3
                    ROE Decomposition (%)
                    EBIT margin                               5.6   9.0    9.3    9.5     8.2     8.7
                    Tax retention ratio                      76.9 71.9    76.1   76.5    74.0    74.0
                    Asset turnover (x)                        5.8   7.4    7.3    5.8     5.8     6.1
                    ROCE (Post Tax)                          24.8 48.1    52.0   42.2    34.9    39.6
                    Cost of Debt (Post Tax)                   8.9   8.7   24.9   39.7    50.2    30.4
                    Leverage (x)                              0.5   0.4    0.1    0.0       -       -
                    Operating ROE                            33.1 62.8    55.0   42.2    34.9    39.6
                    Returns (%)
                    ROCE (Pre-tax)                           31.5 65.7    67.3   53.8    43.6    48.7
                    Angel ROIC                               33.0 69.3    73.0   58.7    49.9    56.1
                    ROE                                      36.5 62.5    59.5   49.3    33.4    38.7
                    Turnover ratios (x)
                    Asset Turnover (Gross Block)              7.4   8.8    8.3    7.4     7.9     8.3
                    Asset Turnover (Net Block)               15.1 17.6    15.4   14.1    17.0    17.8
                    Operating Income / Invested Capital       5.9   7.7    7.8    6.2     6.1     6.4
                    Inventory / Sales (days)                  43     41    36     34      35      35
                    Receivables (days)                        67     69    82     92      95     102
                    Payables (days)                           96    100   108    134     129     112
                    Working capital cycle (ex-cash) (days)    36     26    22     33      38      36
                    Solvency ratios (x)
                    Gross debt to equity                      0.4   0.1    0.1    0.0     0.1     0.1
                    Net debt to equity                        0.1   0.0    0.0      -       -     0.0
                    Net debt to EBITDA                        0.7   0.1    0.1      -       -     0.0
                    Interest Coverage (EBIT / Interest)       9.3 26.6    23.7   28.4    10.5    13.0




February 2, 2011                                                                                  11
                                                                                              Blue Star | 3QFY2011 Result Update




 Research Team Tel: 022 - 39357800                   E-mail: research@angelbroking.com                    Website: www.angelbroking.com


 DISCLAIMER

 This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
 decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
 such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
 referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
 risks of such an investment.

 Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
 investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
 document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

 Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
 trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
 fundamentals.

 The information in this document has been printed on the basis of publicly available information, internal data and other reliable
 sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
 document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
 responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
 Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,
 nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
 Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,
 compliance, or other reasons that prevent us from doing so.

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 Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or
 other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in
 the past.

 Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
 connection with the use of this information.

  Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
  latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have
  investment positions in the stocks recommended in this report.




  Disclosure of Interest Statement                                               Blue Star
  1. Analyst ownership of the stock                                                  No
  2. Angel and its Group companies ownership of the stock                            No
  3. Angel and its Group companies' Directors ownership of the stock                 No
  4. Broking relationship with company covered                                       No

  Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors


 Ratings (Returns):              Buy (> 15%)                            Accumulate (5% to 15%)                     Neutral (-5 to 5%)
                                 Reduce (-5% to 15%)                    Sell (< -15%)


February 2, 2011                                                                                                                          12

				
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