IGI Logo

Strong earnings momentum continues…

About the stock: Solar Industries (SIL) is the largest manufacturer of industrial explosives and explosive initiating systems in India.

* It has a capacity of ~300,000 MT/year. It holds reasonable market share in India of ~28%

* It also leads the exports share from India, which is around 70% in industrial explosive and initiating system

* It exports to 55 countries in the world and has recently expanded its manufacturing base to many African Countries

Q1FY23 Results: Solar reported handsome numbers in Q1FY23.

* Revenue for quarter came in at | 1615.6 crore, up 95.8% YoY & 22.7% QoQ

* EBIDTA margins came in at 17.5% vs. 21.2% YoY & 20% QoQ. EBIDTA came in at | 283 crore, up 62% YoY & 7.7% QoQ

* PAT (post minority interest) was at | 170.2 crore in Q1FY23 vs. | 167.9 crore in Q4FY22 and | 97.5 crore in Q4FY22

What should investors do? Solar is expected to perform well going forward on back of strong demand from Coal and Infra sector along with its foreign subsidiaries.

* We changed our rating from HOLD to BUY on the stock.

Target Price and Valuation: We value the stock at | 3390, valuing the business at 38x FY24E earnings.

Key triggers for future price performance:

* Better performance from overseas subsidiaries on the back of strong demand and economic activities returning to normal.

* Defence and export segments picking up due to diversified portfolio.

Alternate Stock Idea: We also like NRB in our capital goods coverage

* It offers a play on needle roller bearings, which are largely used in auto applications.

* BUY with a target price of | 220 per share i.e. 18x P/E on FY24E EPS.

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Above views are of the author and not of the website kindly read disclaimer