Solar Industries' stock in last five years has seen sharp expansion in its P/E multiple (one-year-forward P/E multiple average at 47.7x). This multiple expansion was on the back of its long-term ability to generate cash-flows from operations (over FY10-FY25, it accumulated Rs 71.1 billion in operating cash flows), and continuously focussed on growing its TAM (with Rs 155 billion defence order book and a robust pipeline, Solar Industries could generate Rs 112.4 billion in defence revenues over FY26-28e) where competition is less, government is focused on import substitution.
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Anand Rathi Report
Post the Q2 call, greater visibility on Solar Industries India Ltd.'s defence pipeline, ongoing defence-focused capex, and rollout of Defence Procurement Manual-2025 further strengthen our confidence in its ability to capture a rapidly expanding total addressable market.
We expect rebound in domestic business in Q3-Q4, supported by continued momentum in defence, overseas, and exports, driving FY26 revenues to Rs 96 billion (vs management's Rs 100bn guidance).
We forecast 28.0%/30.6% revenue/PAT CAGRs over FY25-28, with RoE >28% throughout.
Our revised target price stands at Rs 17,859 (60x FY28e EPS). With ~30% upside, we upgrade Solar Industries to Buy.
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