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ICICI Securities Report
We believe that the certification of the three new explosives by the Indian Navy is a significant development for Solar Industries India Ltd., as these are based on in-house R&D efforts.
Management has earmarked Rs 4 billion in FY25 as capex for defence (compared to the gross block of Rs 10 billion), alluding to the significant focus in the space.
Taking cognizance of this development and possible uptick in its earnings beyond the forecast period, we raise our price/earning multiple to 65 times (earlier 55 times), leading to a revised target price of Rs 13,250.
We maintain our Buy rating on Solar Industries and continue to recommend it as the top pick in the defence space.
Key risks
Delay in awarding of Pinaka order.
Further fall in ammonium nitrate price leading to negative price-cost spread.
Slow traction in construction and infrastructure segments.
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