Blue Star (BLSTR) reported consolidated revenue of Rs12.5bn for 2QFY20, up 21% YoY, above our/consensus estimate of Rs11bn each. Unitary Products segment’s revenue grew by 10% YoY to Rs3.8bn in a non-seasonal quarter, while demand was driven by Tier 3/4/5 towns. EMPS segment’s revenue grew by 24% YoY to Rs7.8bn on execution of a healthy order book. Order book grew by 32% YoY and 3% QoQ to Rs29.4bn as on 1HFY20. Unitary Products’ EBIT margin grew by 80bps YoY to 3.2%, while EMPS segment’s margin fell 140bps YoY at 5.7%, on a high base, but up 30bps QoQ. Consolidated EBITDA margin rose by 30bps YoY to 5.9%, exactly in- line with our/consensus estimate. The company has not shifted to the lower tax regime as it is yet to avail Rs670mn worth of MAT credit. Lower interest costs and higher other income aided bottomline, with the PAT growing by 94% YoY to Rs379mn, above our/consensus estimates of Rs301mn/Rs320mn. We have marginally tweaked our estimates and retained Buy rating on BLSTR with a SOTP-based target price of Rs970 (Rs965 earlier). On September 2021E earnings, we assign a P/E of 35x to Unitary Product segment and 15x to the project business.