Solar Industries' stock target raised to Rs 16,000 by ICICI Securities amid robust defence growth

In the current volatile markets, Solar Industries Limited (SOIL) has managed to outperform its peers, according to ICICI Securities. The stock's performance is underpinned by a stable traditional India business and a growing exports segment. ICICI Securities is particularly enthused about the company's rapidly expanding defence business, which is poised to drive significant growth.

ICICI Securities anticipates a 35% compound annual growth rate (CAGR) in earnings per share (EPS) through the fiscal year 2027, compared to fiscal year 2024 levels. This expectation is based on continuous capital expenditure and SOIL’s ventures into new domains. As a result, the brokerage has increased the price-to-earnings (P/E) multiple for Solar Industries to 70x, setting a revised target price (TP) of INR 16,000 for the stock.

The defence business is seen as a major growth driver, with ICICI Securities noting that SOIL is expected to be net cash positive by the end of fiscal year 2025, buoyed by advance payments for the Pinaka order. The company is positioned to invest significantly up to INR 150 billion through fiscal year 2030, combining internal accruals with debt up to INR 50 billion.

ICICI Securities highlights SOIL’s evolving defence segment as a key area of interest. The order book is projected to grow from INR 26 billion at the end of fiscal year 2024 to nearly INR 130 billion by the end of fiscal year 2025. The company's strategic leap from supplying consumables to systems and platforms aligns well with global trends such as the ReArm Europe initiative and ammunition shortages.

Export orders, which make up approximately 50% of the order book, are said to reduce customer concentration and execution risks substantially. The defence business is anticipated to contribute 33-35% of overall revenue by fiscal year 2030, up from 19-20% in fiscal year 2025. This shift underscores the significant earnings potential in SoIL's defence sector.

ICICI Securities notes that the investments in the defence sector will align with the Memorandum of Understanding (MoU) already executed with Maharashtra’s government. These investments are likely to cover an array of defence products, including drones, unmanned aerial vehicles (UAVs), counter-drone systems, energetic materials, and new-generation explosives, along with military transport aircraft.

ICICI Securities continues to endorse Solar Industries as the top pick in the defence space, recognising its capacity to leverage defence-related opportunities. The company’s significant order book growth and strategic alignment with global defence needs position it well for sustained expansion, benefiting from both domestic and international demand.