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Building scale, expanding global footprint

Solar Industries (SOIL) is a leader in the domestic explosive market and has established a strong presence in international markets for industrial explosives. Its recent acquisition of Omnia Holdings bolsters its position in South Africa and neighboring markets and provides strong support for the backward integration of ammonium nitrate. SOIL has also transitioned from being a supplier of explosive materials to becoming an integrated defense manufacturer. The progression from high-melting explosives (HMX) to ammunition, rockets, and counter-drone systems reflects its deliberate strategy of moving up the defense value chain. Successful trials and commissioning of Nagastra, Rudrastra and Bhargavastra would further diversify the company’s revenue stream beyond Pinaka and HMX. After the completion of the Omnia acquisition, we expect industrial explosives/defense mix of 78%/22% by FY29. We expect SOIL to deliver a CAGR of 43%/34% in consolidated revenue/PAT over FY26-30, with the industrial explosive segment’s growth settling at mid-teens after FY28 and the defense segment sustaining a higher growth rate. We initiate coverage on SOIL with a BUY rating and a TP of INR23,000, based on a 50x P/E on Dec’28E EPS

Key investment thesis

SOIL is a market leader in India's commercial explosive industry with a volume market share of 26% in FY25, supported by a comprehensive portfolio of bulk explosives, packaged explosives, initiating systems, and blasting accessories. The company enjoys a strong wallet share of ~20-23% with Coal India and is also gaining wallet share with private miners. SOIL has already established a growing international footprint through exports and overseas manufacturing operations. It has recently acquired South Africa-based Omnia to further enhance its positioning in several international markets. We expect growth in SOIL’s existing explosive segment (exc. Omnia) to be led by volume and strong pricing in FY27, followed by stable growth of 10-15% YoY.

Omnia acquisition to impact margins in near term

SOIL has announced the purchase of a 100% stake in Omnia Holdings for INR130b, to be funded by debt and internal accruals. Headquartered in Johannesburg, South Africa, Omnia is a chemicals and explosives manufacturing company with a presence in mining, agriculture and chemicals segments. In FY26, Omnia reported revenue of ~INR130b and EBITDA margin of 11.5%. The margin and return profile of Omnia is lower than that of SOIL. This acquisition will result in higher debt and lower return ratios for SOIL in the near term. However, the acquisition aims to create a more integrated global platform and enhance backward integration through ammonium nitrate facilities. Omnia’s BME Mining business complements SOIL’s existing product and service portfolio. We expect Omnia’s revenue to grow from INR133b in FY26 to INR162b by FY30.

Increased portfolio of offerings in defense

SOIL has diversified from the traditional business of HMX, TMT and RDX to warheads to rockets (Pinaka) and is now foraying into drones and UAV such as Nagastra (already received orders for Nagastra) and Rudrastra and doing test trials of a counter-drone product (Bhargavastra). SOIL already makes ingenuous booster systems for the Brahmos missile and is expanding facilities for setting up capacity for 155mm ammunition. The company’s defense order book and revenue have compounded at 148%/81% over FY22-26. As of Jun’26, the defense order book stood at INR180b, including international defense orders worth INR110b and a Pinaka order of INR60b.

Potential orders in defense

We expect the defense segment to continue to benefit from

1) additional Pinaka regiments, guided Pinaka, replenishment rockets and export demand

2) future variants (Nagastra-2 and Nagastra-3)

3) orders for Bhargavastra after successful trials

4) domestic and export orders for 155mm ammunition

5) 125kg air bomb for NATO and Russian aircraft. The company also plans to get into proximity fuze and high-performance UAVs, UAS, C-UAS for surveillance and defense against ariel threats. We expect defense segment order inflows to grow at 29% over FY26-30. SOIL has also signed an MoU with the government of Maharashtra to establish an Anchor Mega Defense and Aerospace project in Nagpur with a proposed investment of INR127b over the next 10 years.

Financial outlook

We estimate a CAGR of 43%/36%/34% in overall revenue/EBITDA/PAT over FY26-30, baking in growth in explosives and defense and Omnia acquisition. Additional upside to revenue estimates can come from potential large-sized platform orders beyond the base orders in defense and synergies from the recent acquisition over time.

Valuation and recommendation

The stock is currently trading at 49.1x/38.5x P/E on FY28E/FY29E EPS. With revenue/ EBITDA/PAT CAGR of 43%/36%/34% over FY26-30E, we recommend BUY with a TP of INR23,000, based on 50x Dec’28 EPS. Going ahead, SOIL will focus on acquisition synergies, scale-up of Pinaka execution, follow-on orders for Nagastra, potential induction of Bhargavastra and Rudrastra, and growth in export defense orders

Key risks and concerns

Key risks to our estimates and rating would emerge from delays in order inflows and in the finalization of a large platform order pipeline or country-specific risks due to high exposure to the African market. Poor performance of subsidiaries and sharp currency fluctuations can also impact overall margin performance.

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