Hold Solar Industries; target of Rs 1045: ICICI Direct

ICICI Direct's research report on Solar Industries

Solar Industries (SIL) reported strong Q3FY19 numbers, albeit with lower margins. Revenues came in at Rs 653 crore, up 40.2% YoY (our estimates Rs 550 crore). All segments of the business reported strong growth for the quarter Industrial explosives segment (54.1% of topline) reported growth of 43% YoY. Overseas and exports segment (37% of topline) grew 42.3% YoY to Rs 239 crore. Revenues from the defence segment were at Rs 41 crore for the quarter (Rs 10 crore in Q3FY18). Defence order book is now at Rs 430 crore SIL witnessed a gross margin contraction of 250 bps YoY. Employee expenses also grew 29% YoY. Other expenses also grew 58.3% YoY. Thus, EBITDA margins came in at 18.6% vs. 22.4% YoY. Absolute EBITDA increased 16.4% YoY to Rs 121.5 crore.

Outlook

We value the company at 27x FY21E EPS of Rs 38.7 to arrive at a target price of Rs 1045. We maintain HOLD rating on the company.

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Read More First Published on Feb 19, 2019 05:09 pm