On March 12, Solar Industries India witnessed a robust 3.6 percent surge in its shares, driven by analysts at ICICI Securities reiterating their “buy” recommendation for the stock while revising the target price to Rs 9,050 per share. This adjustment suggests a potential upside of 13 percent from the current trading level.
Amidst a challenging market environment, the industrial explosives manufacturer has displayed remarkable resilience, with its stock climbing more than 18 percent since the beginning of the year, outperforming the benchmark Sensex which has risen by a mere 2 percent during the same period.
Notably, Solar Industries achieved a significant milestone when it reached a 52-week high of Rs 8,499 on November 20, 2023, further bolstering investor confidence in the company’s growth trajectory and market position.
ICICI Securities analysts emphasized the importance of reassessing Solar Industries as they anticipate a notable increase in the proportion of revenue derived from the defense sector, expected to reach a significant 18-20 percent by the fiscal year 2025.
“In terms of business segments, we foresee defense emerging as the second-largest contributor after international operations beginning from FY25. Additionally, we expect margins to experience further uplift, surpassing the current levels and potentially exceeding 25 percent,” noted the brokerage firm.
In a strategic move, the brokerage firm adjusted the valuation multiple for Solar Industries upwards by 10 percent, settling at 55x compared to the previous 50x. This decision reflects their confidence in the company’s potential for securing additional export orders and enhancing overall profit margins.
However, analysts also highlighted several risks associated with their recommendation. These include potential delays in the awarding of the Pinaka order, a potential decline in ammonium nitrate prices resulting in adverse price-cost differentials, and sluggish growth in the construction and infrastructure segment.
In a significant development, Solar Industries disclosed that it had secured export orders amounting to Rs 455 crore for the provision of defence products, extending over the next two years. This substantial contract underscores the company’s prowess in catering to the defence sector and further solidifies its position in the market.
Solar Industries specializes in manufacturing industrial explosives primarily utilized in the mining and infrastructure sectors. Alongside industrial explosives, the company also offers a range of defence products, showcasing its diversified portfolio and expertise across various segments.
As of 11:44 am, the stock was trading at Rs 7,833.85 on the National Stock Exchange, marking a notable increase of 1.33 percent from the previous close.
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