PL Capital has given a target price of ₹ 23,124 on Solar Industries India shares with a BUY rating. The brokerage cited defence, domestic explosives market and overseas expansion as the main pillars of the company's growth.
Business: PL Capital has initiated coverage on Solar Industries India Limited (SOIL) shares with a BUY rating. The brokerage has set the target price of the stock at ₹23,124, while the stock had closed at ₹19,710 on BSE on Friday. On this basis, there is a possibility of more than 17 percent return in the stock till the target of brokerage.
PL Capital starts coverage on Solar Industries India
PL Capital has initiated coverage on Solar Industries India Limited (SOIL) stock with a BUY rating. The brokerage has set a target price of ₹ 23,124 for it. On Friday, the company's shares closed at the level of ₹ 19,710 on BSE. Compared to this closing price, the brokerage's target indicates a potential return of more than 17 percent.
According to the brokerage, the company is positioned to sustain growth in the coming years due to its strong position in the domestic industrial explosives market, growing demand in the defense business and expansion in international markets.
Growth will get support from defense and foreign trade
PL Capital has listed several key reasons behind SOIL's future growth. These include the company's share of about 26 percent in the domestic industrial explosives market. This position is said to be linked to the company's integrated manufacturing network and long-standing relationships with customers.
According to the brokerage, strong growth in defense revenue is also expected. The company's defense business is expected to benefit from the increasing demand for ammunition, loitering munitions and missile systems.
Apart from this, the company is expanding its foreign business in 10 countries. According to PL Capital, this will give the company an opportunity to diversify its business and expand on a large scale.
SOIL has also expanded its technological capabilities in the field of drone systems. The company's range includes systems such as Nagastra, HALE/MALE UAVs, Rudrastra and Bhargavastra.
Estimated CAGR of 28-30% in FY26-29E
PL Capital estimates the company's revenue and adjusted PAT to have a CAGR of around 28 per cent and 30 per cent respectively during FY26-29E. According to the brokerage, fast defense growth, expansion of international explosives business and better revenue mix will be the main reasons for this.
The brokerage values SOIL at 62 times its September 2028 estimated PE and 34 times its estimated EV/EBITDA. Whereas, the stock is trading at 58.7 times and 48.2 times of FY28/FY29E estimated PE.
Strong hold in domestic explosives market
Solar Industries India has strengthened its position in the domestic explosives market. As per available data, the company's domestic market share increased from 23.3 per cent in FY15 to 26.7 per cent in FY25.
The domestic market is mainly divided into three major sub-channels. Among these, Coal India and Singareni Collieries Company are the major customer groups. The second segment is non-COAL institutional mining, which includes private coal mines, iron ore and manganese producers, captive limestone mines and industrial consumers.
The third segment includes demand related to housing and infrastructure. The company serves this market through its nationwide dealer network. This includes projects related to tunneling, roads, dams and real estate.
Expected improvement in profits due to large scale business
According to PL Capital, the company's larger scale of operations and operating leverage could lead to improved profits in the coming years. A change in the company's revenue mix is also expected due to the increasing contribution of defense and international business.
However, the BUY rating and target price of ₹23,124 is PL Capital's estimate, not a guarantee of definite returns. Actual performance in the stock market will depend on company results, market conditions and other business risks.