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Nirmal Bang
Solar Industries (Buy)
CMP: ₹1,110
Target: ₹1,380
Solar Industries India (SIIL) reported consolidated revenues of ₹670 crore in 4QFY19 (highest-ever quarterly sales), up 17 per cent y-o-y and 6 per cent above our estimate. The top-line growth was driven by housing and infrastructure segment (up 43 per cent y-o-y at ₹230 crore) as well as sales to Coal India (up 19 per cent y-o-y at ₹130 crore).
Defence segment’s sales were healthy at ₹57.3 crore, while exports and overseas revenues declined 16 per cent y-o-y to ₹170 crore impacted by softer sales in Turkey and Zambia. Sales of explosives grew 15 per cent y-o-y to ₹380 crore driven by 10 per cent y-o-y volume growth (1,05,244 MT) and 5 per cent y-o-y rise in realisation (₹36,324/MT). EBITDA grew 20 per cent y-o-y to ₹140 crore, translating to a 60 bps y-o-y rise in operating margin to 21.1 per cent, in line with our estimate. PAT grew 9 per cent y-o-y to ₹71.6 crore, 6 per cent above our estimate.
We remain positive on SIIL’s business scalability as well as strong financial health. We have marginally tweaked our earnings estimates and retained ‘Buy’ rating on SIIL with a revised target price of ₹1,380 (₹1,390 earlier) based on 32x FY21E earnings.
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