Rs 1,029 to Rs 5,919: This defence stock turned into a multibagger in three years; hit record high today

Shares of Solar Industries India Ltd have turned into multibagger in the last three years. The defence sector stock, which closed at Rs 1029.2 on November 6 , 2020 hit a record high of Rs 5919 in the current session, delivering 475% returns during the period. An amount of Rs 1 lakh invested in Solar Industries India stock three years ago would have turned into Rs 5.75 lakh today. In comparison, Sensex has risen 55 per cent during the period. It fell to a 52-week low of Rs 3456.95 on July 11, 2023.   

At 2:59 pm today, Solar Industries India stock was trading at Rs  5865.20 against the previous close of Rs 5584.10 on BSE. It rose 6% intraday to Rs 5919 on BSE. Market cap of the firm stood at Rs 53,165 crore. Total 5114 shares of the firm changed hands amounting to a turnover of Rs 2.98 crore on BSE. The stock had a beta of 0.2 in the last one year, indicating very low volatility.  

In terms of technicals, the relative strength index (RSI) of Solar Industries India stands at 66.9, signaling the stock is trading neither in the overbought nor in the oversold zone. Solar Industries India shares are trading higher than the 5 day, 10 day, 20 day, 50 day, 100 day and 200 day moving averages.        

In a year, the stock has gained 43.54 per cent and risen 32.33 per cent this year.   

Financial Performance    

Solar Industries India logged a 13.43 percent year-on-year rise in Q2 net profit to Rs 200.1 crore against Rs 176.4 crore in the September 2023 quarter. However, consolidated revenue from operations fell to Rs 1355.2 crore in Q2  against  Rs 1571 crore in the September 2022 quarter.  

The firm reported the highest ever EBITDA margin of 24.95% in Q2 of this fiscal against 19.08% in the September 2022 quarter.  

The defence firm reported a 10% rise in profit at Rs 202 crore in the June 2023 quarter against Rs 183 crore profit in the corresponding quarter of previous fiscal. Sales of Solar Industries rose 4% to Rs 1682 crore in Q1 against Rs 1616 crore in the June 2022 quarter. EBITDA climbed 14% to Rs 331 crore in Q1 against Rs 292 crore in the June 2022 quarter. 

Stock outlook 

Here’s a look at what brokerages said on the outlook of the stock.   

Nuvama Institutional Equities has a hold call on the stock with a target price of Rs 5371. Of late, Solar Industries India has lately benefited from volume growth from Coal India and infra demand due to the poor monsoon in Q2FY24. The brokerage expects Solar Industries India to maintain 20% growth in near term in its explosive business and defence can be a game changer given the geopolitical backdrop. 

“As management is confident of clocking 20% volume growth led by strong demand from Coal India and EBITDA margin of 22%-plus, we are raising FY24E/25 EPS by 6%/9% even as volatility in the defence business is concerning. This along with a rollover to Q3FY26 lifts the SOTP-based target price to Rs 5,371 (defence value INR928; earlier target price of Rs 4,266) at an unchanged 30x, retain ‘HOLD’. 

ICICI Securities said the firm posted best ever EBITDA margin. EBITDA margin surged to a record 24.9% on better price-cost spread. It assigned a revised target of Rs 5920 earlier (Rs 4700) for the stock.  

"Taking cognizance of higher margins and volumes, we raise our FY24E/FY25E EPS by 14%/12%. However, we expect substantial contribution from the defence segment and hence, raise our valuation multiple to 45x (earlier 40x) to capture this upside. Our revised target price works out to Rs 5,920 (earlier Rs 4,700). We believe, many benefits from price-cost spread of explosives and volume growth have been priced in. Hence, we downgrade SOIL to ADD (from BUY). That said, we believe that the benefits from defence can be multi-fold and could provide an additional upside to our earnings estimates," said the brokerage. 

About Solar Industries India     

Solar Industries is an India-based manufacturer of industrial explosives for the mining and infrastructure sector. The company offers industrial explosives and defence products. 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.   

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