Hold Premier Explosives; target of Rs 315: Karvy

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26 Aug, 2025 12:21

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Karvy's report on Premier Explosives

We expect the explosive business to grow at a CAGR of 6.2% during FY14-17E. Uptick in demand from Mining & Infrastructure sectors could lead to recovery in the domestic detonator business with CAGR volume and price growth of 5.2% and 4.8% respectively during FY14-17E with a conservative dip in FY15E.

Propellants Business in a Sweet Spot: We expect ramp-up in production of critical weapons programs like Akash and Pinaka leading to increased off-take of propellants by weapon's integrators. We expect defense business to grow at a CAGR of 28% during FY14-17E as propellants segment expands.

R&D and Specialty Products: Premier's R&D activities have led to commercialization of lab scale technologies like 'Nickel Hydrazine Nitrate (NHN)' based detonators, 'Oleoresin Capsicum' based Teargas Grenades and other products as import substitution ranging from Explosive Bolts and Cable cutters to Smoke Flares and Pyro Actuators. Premier has also developed various high energy materials in association with DRDL for use in future guided missile programs that are soon to be inducted into armed forces.

'Buy and Make in India' Opportunity: We expect Premier to benefit from supply of ammunition to artillery guns program by participating in Offset opportunity through a JV with an Indian partner once the L1 is finalized.

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Valuation and Outlook:

"At CMP of Rs.297 Premier is trading at 20.6xFY17E earnings per share and 11.1xFY17E EV/EBDITA. Company appears to be fairly valued given the expectations over operational efficiency and strong return ratios during FY14-17E. The recovery in Mining and Infrastructure sector could lead to recovery in prices of domestic detonators while potential growth in high margin Defence business seems fairly discounted by the markets. We recommend a 'HOLD' for a target price of Rs.315, which implies an upside 6% from the CMP", says Karvy Stock Broking research report.

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