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Centrum Broking Report
Solar Industries India Ltd. is a market leader in the industrial explosives sector with ~25% domestic market share. The industrial explosives offer healthy growth prospects as it is a key consumable product for mining and infrastructure sector.
We expect a robust 27% revenue compound annual growth rate over FY21-24E owing to -
rising infra capex in India,
foraying in larger overseas markets and
imminent exponential growth in the defence segment.
The margin profile is strong (Ebitda margin of 19-21% since past seven years), due to presence of price variation clause, and is expected to improve further led by improving revenue mix with rising share of defence and packaged explosives.
Solar Industries' valuation is likely to remain rich considering high growth prospects (35% earnings CAGR over FY21-24E) and robust margin profile in an industry which continues to be licensed controlled with high entry barriers.
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