Multibagger Defence Stock Faces Correction, but Long-Term Growth Remains Strong
Shares of Solar Industries India, a leading player in the defence and industrial explosives sector, have experienced a 34% decline from their all-time high of ₹13,300, recorded on July 11, 2024. Despite the recent correction, the stock has maintained its multibagger status, delivering 274% returns in the last three years and 661% in five years.
Stock Performance & Market Indicators
As of the latest trading session:
- Stock Price: ₹8,739.05, down 1.46% from the previous close of ₹8,868.60 on BSE.
- Market Capitalization: ₹79,079 crore.
- Trading Volume: 633 shares, with a turnover of ₹55.46 lakh.
- Stock Beta (1-Year): 1.2, indicating moderate volatility.
The stock is currently trading below its 5-day, 10-day, 20-day, 50-day, 100-day, 150-day, and 200-day moving averages, signaling technical weakness. Additionally, the Relative Strength Index (RSI) stands at 42.7, indicating the stock is neither overbought nor oversold.
Strong Q3 FY25 Financial Performance
Despite the price correction, Solar Industries India posted robust financial results for Q3 FY25, demonstrating strong revenue and profit growth:
- Net Profit: ₹315 crore, up 55.2% YoY from ₹203 crore in Q3 FY24.
- Revenue: ₹1,973 crore, marking a 38% increase YoY from ₹1,429 crore.
- EBITDA: ₹527 crore, up 48% YoY from ₹355.3 crore.
- EBITDA Margins: 26.7%, compared to 25% last year.
These figures highlight the company’s resilient financial performance despite broader market fluctuations.
ICICI Securities: Retains ‘BUY’ with ₹13,720 Target Price
ICICI Securities remains optimistic about Solar Industries India, maintaining a BUY rating with a target price of ₹13,720.
Growth Drivers Highlighted by ICICI Securities
- Planned Capital Expenditure (Capex): The company plans to invest ₹13,000-15,000 crore over the next five years in defence and non-defence (exports & overseas) businesses.
- Debt-Free Growth: The capex is expected to be funded through internal accruals, keeping the company financially strong.
- Net Cash Position by FY25: The company is expected to achieve a net cash-positive status by the end of FY25.
- High-Margin Business Segments: Growth will be driven by high-margin defence contracts, allowing Solar Industries to move up the value chain from materials to defence platforms.
“The recent price correction offers a strong entry point for long-term investors. We expect Solar Industries to continue growing in high-margin defence segments, moving further up in the defence value chain. We maintain our BUY rating with a target price of ₹13,720, based on 60x FY27E EPS,” ICICI Securities stated.
Centrum Broking: Target Price of ₹11,295 with Strong Growth Forecast
Centrum Broking also remains bullish on Solar Industries India, setting a BUY target of ₹11,295, supported by the following expectations:
- Revenue CAGR of 24% (FY24-27E), driven by higher defence and overseas sales.
- EBITDA Margin Expansion: Expected to increase by 460 basis points, reflecting higher defence orders.
- Market Leadership: Solar Industries dominates the licensed-controlled explosives market, benefiting from high entry barriers.
- Strong Order Book: The company’s robust defence order pipeline will fuel growth over the next 3-5 years.
“Solar Industries expects a revenue CAGR of 20% over the next five years, with domestic and explosives sales growing at 15% CAGR. Defence sales are set to scale up significantly due to a strong order book. The current EBITDA margin of ~27% is sustainable and may improve further,” stated Centrum Broking.
Solar Industries: A Market Leader in Explosives & Defence
Solar Industries India is a leading manufacturer of industrial explosives, serving mining, infrastructure, and defence sectors. With a focus on defence production, domestic expansion, and overseas market penetration, the company is well-positioned for sustained long-term growth.
Conclusion: Short-Term Weakness, Long-Term Strength
While Solar Industries’ stock has seen a significant decline, analysts remain confident in its long-term growth trajectory. Backed by strong financials, increasing defence orders, and aggressive expansion plans, the stock remains a top pick in the defence sector.
With ICICI Securities and Centrum Broking maintaining bullish outlooks, investors may see the current dip as an opportunity to enter the stock at an attractive valuation.
