Solar Industries India's management is confident it will surpass its existing revenue and EBITDA guidance for the financial year 2027. This optimistic outlook is driven by a robust defence order book, expanding international operations, and growth opportunities within the commercial explosives sector.
Strong Growth Drivers and Financial Projections
The company projects FY27 revenue to exceed its current guidance of Rs 14,000 crore. This growth is underpinned by several key areas:
- Domestic Explosives: Continued demand from the mining sector, with significant orders from Coal India and Singareni Collieries Company (SCCL) totaling Rs 2,610 crore.
- Defence Orders: A dominant force in the company's future, accounting for approximately 87% of its total outstanding order book.
- Overseas Operations: Strategic expansion through acquisitions, greenfield projects, and deeper market penetration in international mining.
Solar Industries' total outstanding order book stands at an impressive Rs 20,178 crore, providing substantial revenue visibility. Defence orders alone contribute Rs 17,568 crore to this backlog.
Defence Sector: A Key Growth Engine
The defence business is poised to be a primary driver of growth, benefiting from India's indigenisation efforts and increasing international market demand. Management indicates that orders for the Pinaka rocket system are in their final stages, with potential inflows estimated around Rs 2,600 crore during FY27, further strengthening the defence pipeline.
Ambitious Capex and Operational Efficiency
Solar Industries has outlined an ambitious capital expenditure plan of approximately Rs 12,000 crore to support its long-term expansion strategy. This investment will focus on:
- Expanding defence manufacturing capabilities.
- Indigenising advanced ammunition technologies.
- Enhancing international explosives operations.
- Increasing capacity to meet escalating demand.
The company has also demonstrated improved working capital efficiency, with its cycle declining to 108 days from 130 days in FY26. While net debt increased to Rs 1,177 crore, the net debt-to-EBITDA ratio improved to 0.29 times, indicating manageable leverage.
Brokerage Views and Risks
Global brokerages Goldman Sachs and Jefferies have maintained a bullish stance on Solar Industries. Goldman Sachs reiterated a 'Buy' rating with a target price of Rs 26,550, citing strong growth prospects in defence and exports, though acknowledging ammonium nitrate price volatility as a key risk.
Jefferies revised its target price slightly to Rs 26,260 from Rs 28,160, adjusting its valuation multiple due to investor concerns regarding a potential acquisition of Omnia. However, Jefferies maintains a 'Buy' rating, highlighting the company's strong earnings growth trajectory, with an estimated FY26-30 earnings CAGR of around 29% and a 28%+ ROE. Key downside risks flagged include slower-than-expected execution of defence orders and a potentially higher acquisition price for Omnia.
“We remain positive on Solar Industries given the 30%+ EPS CAGR and 28%+ ROE, even post its potential Omnia acquisition. Buy,” stated Jefferies.
Investors will closely monitor execution timelines, acquisition developments, and fluctuations in ammonium nitrate prices as the company moves towards its ambitious FY27 targets.