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Solar Industries Hits All-Time High, Rallies 6% With Stable Outlook

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Shares of Solar Industries India (SIIL) hit an all-time high of Rs 4,398.70 in intraday trade on Friday, which rallied 6% on the BSE on a stable outlook. SIIL’s share price broke its previous high of Rs 4,269.40 on November 11.

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 has factories in Nigeria, Zambia, Ghana, South Africa, Turkey and Tanzania (Indonesia, Thailand and Australia are coming soon). In FY10, the group entered the defence sector, manufacturing high explosives, delivery systems, ammunition fillers and pyrolysis fuzes.

Rating agencies ICRA and Crisil reaffirmed the ratings on the SIIL banking instrument with a stable outlook.

The reaffirmation of the rating considers SIIL’s leadership in the industrial explosives industry, supported by an extensive manufacturing infrastructure with some units located near mines, backward complexes in India, and manufacturing units in selected countries. Besides its dominant market position in India, SIIL has recently established a reasonable global footprint, supplying products to over 65 countries. In its rating rationale, ICRA said exports and overseas sales accounted for 36% of the group’s total revenue in FY22 and 42% in H1FY23.

The rating considers the favourable medium-term demand outlook and growing demand from end-users such as the mining, infrastructure and defence sectors. Government of India (GoI) Atmanirbhar Bharat Abhiyan’s aim to reduce reliance on imports and increase procurement of indigenous defence products also presents a huge growth opportunity for the company. The company’s order book was also strong at Rs 4,008 crore for the year ended September 30, 2022, indicating revenue visibility.

This includes 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.

Higher Coal India sales and a growing product portfolio targeting the defence and infrastructure sectors, combined with increased international presence, could result in another sales growth of around 50% in FY2023. Crisil said this is evident in the increase in orders to Rs 4,008 crore by September 30, 2022, and Rs 2,982 crore by March 31, 2022.

In terms of operating profitability, the group could pass on the increased input costs to customers. The rating agency said the operating margin was 18.9% in fiscal 2022, with a medium-term forecast of 18-20%.

The stock has rallied 60% over the past six months, compared with a 16% gain for the S&P BSE Sensex. Plus, it’s up 84% over the past year, compared with a 6% gain for the benchmark index.

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