In-line operational performance: Solar Industries’ (SOIL) consolidated revenue for 1QFY17 grew 10% YoY to INR4.2b (v/s our estimate of INR4.4b), EBITDA was up 21.2% YoY to INR866m (v/s our estimate of INR836m), and EBITDA margin expanded by 170bp YoY to 20.4% led by better product mix. Better margin cartridge sales formed 35% of sales as against 29% in 1QFY16. Adjusted net profit grew 13.9% YoY to INR471m (v/s our estimate of INR486m).

Valuation : They maintain Buy rating on the stock, with a target price of INR725 and value SOIL at 30x FY18E EPS (earnings CAGR of 15% over FY16-18E) to factor in the possibility of continued strong growth, with ramp-up in mining / infrastructure activities in India, increasing penetration overseas and also an inflexion point in defence revenues. The premium valuations are also justified given that optimum revenues for defence business stands at ~INR5b (possibly ~FY20) .