Buy Solar Industries; target of Rs 9050: ICICI Securities

ICICI Securities research report on Solar Industries

Solar Industries (SOIL) has received an export order – worth INR 4.45bn to be executed over two years – for products to be used in defence application. Key points: 1) Second major defence export order in Q4FY24. 2) We see the defence order book at ~INR 24bn with the proportion of exports at 60-65%, as on date. 3) Duration of execution of exports contract is 2-3 years. We estimate the revenue from defence sector to be almost 18-20% of overall FY25 onwards (FY23: 5.7%). Hence, EBITDA margin may also improve to above 25% by FY26E.

Outlook

Further, we expect SOIL to win the Pinaka order in the near term. Baking in improved margins and the potential for further defence orders, we raise our valuation multiple to 55x (earlier 50x); accordingly, our TP works out to INR 9,050 (earlier INR 8,130). Retain BUY.