08-05-2025
Is Solar Industries entering a new growth phase with defence orders?
On January 15, India successfully tested its first indigenously developed micro-missile system, Bhargavastra, marking another major milestone under the Aatmanirbhar Bharat initiative. This test symbolises the power of three growth trends: local defence procurement, indigenous technology development, and rising defence exports. Together, these trends have turned Indian defence stocks into multibaggers over the past five years.
Among these outperformers, Solar Industries India stands out. The company has effectively capitalised on all three growth drivers, consistently outperforming the Nifty Defence Index and multiple defence PSUs.
After a 20% correction in the second half of 2024, the stock rebounded strongly, surging over 50% over the last two months. It recently hit an all-time high of Rs 13,664, a staggering 1,490% rally over five years, surpassing the Nifty Defence Index's rally of 1,211.64%.
In Q3 FY25, the company reported its highest-ever quarterly revenue, EBITDA, and order book. Its Q4 earnings are also expected to be robust.
Source: Solar Industries' Quarterly Earnings Reports
Initially focused on industrial clients, Solar Industries entered the defence sector in 2010-11. For over a decade, the company invested steadily in building capabilities with minimal returns, as India's defence space was largely dominated by PSUs and foreign imports. Policy uncertainty and delayed approvals only added to the challenge, and until FY24, the defence segment contributed just 5-9% to revenues.
The wait was finally over when the government ramped up efforts to promote indigenisation and opened up the defence sector to private players, driving Solar Industries' stock upwards.
Solar Industries India share price momentum (May 2020 – May 2025)
Today, Solar Industries stocks trade at a price-to-earnings (PE) ratio of 109x, above its 10-year PE median of 44.7x. Still, many brokerages have a Buy rating on the stock. ICICI Securities, in its April 22 report, gave a Buy rating with a price target of Rs 16,000, which is around 22% higher than its current price.
What makes the company's management, brokerages, and investors bullish?
Solar Industries' long-term investment in defence
Solar Industries started its journey in the early 1980s as a trader. It started manufacturing commercial explosives used in mining, infrastructure, and construction in the mid-1990s. For a long time, its single largest client was Coal India Limited (CIL), accounting for over 90% of the company's revenue.
Solar Industries gradually expanded its exports, and today it is India's largest manufacturer and exporter of explosives and initiating systems, with around 24% market share. Exports make up 40% of the company's revenue.
However, the turning point for the explosive maker was the pick-up in defence products. Solar Industries entered the defence sector in 2010-11 at a time when there weren't many private players.
Even today, the sector is ruled by defence PSUs. Moreover, there was a lack of clarity around policies, and approval took 5-10 years. All this resulted in a weak order book for a private sector player like Solar Industries. Until FY24, the defence segment accounted for 5-9% of the company's revenue.
