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    Fall in raw material prices to benefit Blue Star from Q3 onwards: MD

    Synopsis

    “There are always raw materials and other components which have been procured yearly and those are going to run through the next couple of months. One expects that in Q3 and Q4, the margins could be better than what we delivered in Q1 or what we will deliver in Q2.”

    B Thyagarajan-Blur Star-1200ETMarkets.com
    “Going by the order inflow across the businesses including the electromechanical projects, it seems things are moving very fast; orders are getting finalised, investments are taking place specifically in the manufacturing and the infrastructure segment like metro railway or water or power. I will have a very clear picture some time after Diwali,” says B Thiagarajan, MD, Blue Star Ltd.

    Are raw material prices still above the pre-Covid level? Can you just give us some idea on what has happened in the last one-two months and is the supply and price getting better now?
    The prices of metals have come down but it is going to benefit us only in Q3 because in the supply chain, there is always raw material and components which have been procured yearly and that is going to run through the next couple of months. One hopes that from September onwards, you will get the benefit of lower metal prices.

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    We have come to terms with these two-three things; number one, supply chain disruption. Therefore one plans ahead and holds slightly more inventory. Two, ocean freight rates continue to be high. We have come to terms with that. Three, the volatility in commodity prices and at the same time exchange rate as well. Keeping all this in mind, if your question is related to whether the margins will improve further going forward, one expects that in Q3 and Q4, the margins could be better than what we delivered in Q1 or what we will deliver in Q2. But the fact is I am not yet getting the confidence that we have reached the stable supply chain situation at all.

    Our growth targets are clear and we would like to grow faster than the market. We are looking at somewhere around 15% growth over pre-Covid level which is FY20.

    Of course the big part and the summer season is already over and we have seen that this year it was a bumper year when it comes to the AC sales. But going into the festive season, do you expect the demand momentum to continue. Also is this 15-20% growth rate for the AC business sustainable in the medium term as well?
    So as far as Q1 or summer season is concerned, we were not comparing with last year, we were comparing with the summer of 2019 or what belongs to FY20. Even last year I would not complain the demand started improving from Q3 onwards and as you know in Q3 and Q4 also we delivered great results. My expectation is going by what is happening on the ground. The demand is like pre-Covid levels. There is nothing to complain about.

    But for ACs, these months are not the ones to be counted at all. We will see demand picking up some time in January, February festival season. It will be relatively higher compared with last year. We are waiting for the Onam sales and it is not bad. The room air conditioner sales of these months are not to be reckoned with at all. What one is eagerly watching is if there is a global recession, how much it is affecting India and how much it is affecting our industry and how much it is affecting Blue Star.

    But going by the order inflow across the businesses including the electromechanical projects, it seems things are moving very fast; orders are getting finalised, investments are taking place specifically in the manufacturing and the infrastructure segment like metro railway or water or power. I will have a very clear picture some time after Diwali but everyone is not pointing towards any recession build up.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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