Buy Solar Industries India, target price Rs 3400: Centrum Broking

Centrum Broking has buy call on Solar Industries India with a target price of Rs 3400. The current market price of Solar Industries India is Rs 2708.55. Time period given by analyst is one year when Solar Industries India Ltd. price can reach defined target.

Solar Industries India Ltd., incorporated in the year 1995, is a Mid Cap company (having a market cap of Rs 24522.80 Crore) operating in Chemicals sector.

Solar Industries India Ltd. key Products/Revenue Segments include Explosives (Industrial) and Other Operating Revenue for the year ending 31-Mar-2022.


Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 1317.62 Crore, up 28.56 % from last quarter Total Income of Rs 1024.94 Crore and up 65.98 % from last year same quarter Total Income of Rs 793.83 Crore. Company reported net profit after tax of Rs 174.79 Crore in latest quarter.

Investment Rationale
The brokerage expects a strong revenue/earnings CAGR of 22%/29% over FY22-24E. The revenue visibility from domestic mining segment has improved after two large orders (Rs14.7bn order from Coal India in Oct’21 and Rs15.6bn order from Singareni Collieries in May’22), which have to be supplied over the next two years. Thrust on infra capex will continue to drive packaged explosives business in the domestic market while scale-up of newly forayed geographies will aid growth in overseas markets. Defence revenue visibility is also healthy for FY23 led by Rs4.7bn order book inclusive of multi-mode hand grenade order (out of Rs4.1bn 1mn units order; 414,304 units are supplied in FY22 while the rest will be supplied in FY23). The valuations are likely to remain rich as SOIL offers (1) market leadership, strong growth prospects and robust margin profile in a licensed-controlled explosive industry with high entry barriers and (2) imminent defence scale-up. The brokerage reiterates BUY rating on the stock with a target price of Rs3,400 based on 42x FY24E earnings (1.4x PEG ratio).

Promoter/FII Holdings
Promoters held 73.15 per cent stake in the company as of 30-Jun-2022, while FIIs owned 6.63 per cent, DIIs 14.73 per cent.