The shares of the Defence company specializing in manufacturing bulk explosives, packaged explosives, and initiating systems for the mining, infrastructure, and construction industries, are in focus after a leading Indian brokerage firm, ICICI Securities, initiated a revised Buy target on it with a 23 percent Upside Potential.
Price action
With a market capitalisation of Rs. 1,17,834.34 crores on Thursday, the shares of Solar Industries India Ltd jumped upto 1.5, making a high of Rs. 13281.00 per share compared to its previous closing price of Rs. 13081.25 per share.
Solar Industries India Limited (SIIL), founded in 1995, has become the leading manufacturer of industrial explosives in India, commanding around 30 percent of the market share. The company operates the world’s largest facility for packaged explosives and has a strong export presence, supplying products to 65 countries.
What Happened
Solar Industries India Limited, engaged in manufacturing bulk explosives, packaged explosives, and initiating systems for the mining, infrastructure, and construction industries, is in focus after a leading indian brokerage firm, ICICI Securities, initiated revised a Buy Target of Rs. 16,000 (Earlier Rs. 13,720) on it with an upto 23 percent Upside Potential.
Defence Business Expansion: The company is significantly scaling its defence operations, with its order book growing from INR 26bn to INR 130bn in FY25. This includes supplying systems and platforms, diversifying away from consumables, and capitalising on global trends like the European rearmament and ammunition shortages.
Global and Domestic Tailwinds: The company is well-positioned to take advantage of global defence trends, with a growing share of export orders (around 50 percent) reducing execution risks and customer concentration.
Healthy Financial Position: SOIL is expected to be net cash positive by FY25E and maintain low working capital days (under 90). This allows the company to invest up to INR 150bn by FY30E, supporting robust growth without excessive debt.
Strong Return Metrics: SOIL’s RoCE and RoE remain strong (27.3% and 35.2% respectively in FY25E), indicating efficient capital usage and high profitability, which supports a premium valuation multiple.
Rising P/E Multiple: Given the company’s sustained growth prospects, particularly in the high-margin defence segment, the analysts raised the P/E multiple to 70x (from 60x), justifying a higher target price of INR 16,000.
Solar Industries India Limited offers a wide range of products, including industrial explosives, explosive initiating systems, defence explosives, and export products, catering to both domestic and international markets.
Industrial Explosives as per recent data (86 percent in FY24 vs 91 percent in FY22): The company manufactures bulk explosives, packaged explosives, and initiating systems, finding applications in the mining, infrastructure, construction, Defence, and Space sectors.
Order Book
As of Q3FY25 solar Industries Company Limited has maintained an order book of Rs. 7,122 crore, which includes orders from defence and CIL (Coal India Limited) & SCCL (Singareni Collieries Company Limited), and many more.
Financials
The company’s revenue rose by 37.6 percent from Rs. 1,440.05 crore to Rs. 1,982.62 crore in Q3FY24-25. Meanwhile, the Net profit rose from Rs. 203.33 crore to Rs. 314.87 crore during the same period.
Written by Ashok Kumar