Solar Industries hits all-time high, rallies 6% on stable outlook

The Atmanirbhar Bharat Abhiyan of the GoI, which is aimed at curtailing import dependence and increasing the sourcing of indigenous defence products, also presents large growth opportunities.

Shares of Solar Industries India (SIIL) hit an all-time high of Rs 4,398.70, as they rallied 6 per cent on the BSE in Friday’s intra-day trade on stable outlook. The stock of explosives company surpassed its previous high of Rs 4,269.40 touched on November 11.

The Solar group is one of the largest domestic manufacturers of bulk and cartridge explosives, detonators, detonating cords and components. It has manufacturing facilities at 29 locations in India, and plants in Nigeria, Zambia, Ghana, South Africa, Turkey and Tanzania (with Indonesia, Thailand and Australia coming up). In fiscal 2010, the group entered the defence sector to manufacture high-energy explosives, delivery systems, ammunition filling and pyros fuses.

The rating agencies ICRA and Crisil have reaffirmed the ratings of the SIIL’s bank instruments with a stable outlook.

The reaffirmation of the rating takes into account the leadership position of SIIL in the industrial explosives industry, supported by a large manufacturing infrastructure with some units in proximity to mines, a backward integrated facility in India as well as manufacturing units in select countries. In addition to a dominant market position in India, SIIL has developed a reasonable global footprint in recent years with supply to over 65+ countries. Exports and overseas sales accounted for 36 per cent of the Group’s total revenues in FY2022 and 42 per cent in H1 FY2023, ICRA said in rating rationale.

The rating considers the favourable medium-term demand outlook with increased demand from the end-users such as the mining, infrastructure and defence sectors. The Atmanirbhar Bharat Abhiyan of the Government of India (GoI), which is aimed at curtailing import dependence and increasing the sourcing of indigenous defence products, also presents large growth opportunities for the company. The order book of the company, indicating revenue visibility, is also strong at Rs 4,008 crore as on September 30, 2022.

This comprises orders worth Rs 3,123 crore from Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL) and defence orders of Rs 885 crore, ICRA said.

Increasing sales from Coal India and a growing portfolio of products catering to defence and infrastructure segments, combined with the rising international presence may lead to another around 50 per cent sales growth in fiscal 2023. This is evident in the increase in the order book, to Rs 4,008 crore as on September 30, 2022, from Rs 2,982 crore as on March 31, 2022, Crisil said.

In terms of operating profitability, the group is able to pass on rising input costs to customers. The operating margin was 18.9 per cent in fiscal 2022 and is projected at 18-20 per cent over the medium term, the rating agency said.

In past six months, the stock has zoomed 60 per cent, as compared to 16 per cent rise in the S&P BSE Sensex. Further, in past one year, it has rallied 84 per cent, as against 6 per cent gain in the benchmark index.