Solar Industries - Stronger Defence Proportion To Arm Higher Margins: ICICI Securities

ICICI Securities Report

Solar Industries India Ltd. has received an export order – worth Rs 4.45 billion to be executed over two years – for products to be used in defence application. Key points:

1. Second major defence export order in Q4 FY24.

2. We see the defence order book at ~Rs 24 billion with the proportion of exports at 60-65%, as on date.

3. Duration of execution of exports contract is two-three years.

We estimate the revenue from defence sector to be almost 18-20% of overall FY25 onwards (FY23: 5.7%). Hence, Ebitda margin may also improve to above 25% by FY26E.

Further, we expect Solar Industries to win the Pinaka order in the near term. Baking in improved margins and the potential for further defence orders, we raise our valuation multiple to 55 times (earlier 50 times); accordingly, our target price works out to Rs 9,050 (earlier Rs 8,130). Retain Buy.

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