Solar Industries India Ltd. share price target

The weak performance in Q3FY20 was largely the result of extended monsoons, which led to the disruption in mining and infrastructure activities. This impacted the sale of packaged explosives in the eastern, central and northern regions. Demand for packaged explosives is expected to remain weak in the near term. On the other hand, Coal India's production was hindered by flooded mines. However, December and January saw an uptick in mining activities giving some respite for Q4FY20. Decline in prices of ammonium nitrate by ~8% coupled with a change in product mix (17% YoY...

Sector: Chemicals /Small Cap | Earnings Update 2QFY20 Background: Established in 1995, Solar Industries is the largest manufacturer of industrial explosives and explosive initiating systems in India and has the world's largest manufacturing facility for packaged explosives. With a licensed explosives capacity of over 290,000 MT/annum, the company has ~28% market share in India. Solar, with a 70% market share in exports from India, exports to 51 countries around the world. Economic Explosives, a 100% subsidiary, manufactures detonators. Solar has manufacturing facilities spread across 25 locations and eight states in India. In recent years expanded its manufacturing base to Nigeria, Zambia, South...

Sector: Chemicals /Small Cap | Earnings Update 1QFY20 Background: Established in 1995, Solar Industries is the largest manufacturer of industrial explosives and explosive initiating systems in India and has the world's largest manufacturing facility for packaged explosives. With a licensed explosives capacity of over 290,000 MT/annum, the company has ~28% market share in India. Solar, with a 70% market share in exports from India, exports to 51 countries around the world. Economic Explosives, a 100% subsidiary, manufactures detonators. Solar has manufacturing facilities spread across 25 locations and eight states in India. In recent years expanded its manufacturing base to Nigeria, Zambia, South Africa, Turkey, Ghana and Australia. SIIL has also interests in the coal mines (in Chattisgarh) through two JVs....

Operational performance below expectation, impacted by weak overseas business: 1QFY20 consol. revenue remained flat YoY at INR6.2b (v/s our est. of INR7.2b), impacted by 18% YoY decline in exports and overseas business (INR350m translational loss in the overseas business). EBIDTA declined 2.8% YoY to INR1.3b (below our est. of INR1.5b). Margin declined 80bp YoY to 20.5% (below our est. of 21.3%) due to (a) raw material price (ammonium nitrate) increase not being completely passed on to the end consumer, and (b) forex loss of INR90m being impacted due to INR appreciation. Adj. net profit grew 5%...

For FY19, topline in the industrial explosive space grew 21.2% YoY to | 1273 crore. Volumes grew 8.8% YoY while realisations grew robustly by 11.3% YoY. Q1FY20 has seen softened demand from coal mining companies due to lower overburden removal. Over the next few quarters, the management expects demand to stabilise for the year. Driven by push for infrastructure sector by the government, road construction and housing are also expected to do well, going ahead. On the whole, improved offtake from key clients like Coal India and SCCL are expected to drive industrial explosives growth...

Explosives, defence continues to clock solid performance In FY19, topline in industrial explosives space grew 21.2% YoY to | 1273 crore. Volumes grew 8.8% YoY while realisations grew robustly by 11.3% YoY. Going ahead, the management commentary suggests this segment will pick up due to increased offtake from its key clients like Coal India and SCCL. Packaged (cartridge) explosives are also likely to continue their accelerated trajectory with strong demand from infrastructure and mining customers. Defence execution has materially picked up with FY19 revenues at | 170...

Operational performance in line with expectations: 4QFY19 consol. revenue increased 17.0% YoY to INR6.7b (v/s our estimate of INR6.8b), supported by growth in volume (10%) and realization (5%). EBIDTA grew 21% YoY to INR1.4b (in-line with our estimate of INR1.4b). Margin improved 60bp YoY to 21.1% (marginally below our estimate of 21.3%) due to (a) raw material price (ammonium nitrate) increase not being completely passed on to the end consumer, and (b) forex loss of INR17m being impacted due to INR appreciation. Adj. net profit grew 18% YoY to INR776m (ahead of our estimate...

Sector: Chemicals /Small Cap | Earnings Update 4QFY19 Background: Established in 1995, Solar Industries is the largest manufacturer of industrial explosives and explosive initiating systems in India and has the world's largest manufacturing facility for packaged explosives. With a licensed explosives capacity of over 290,000 MT/annum, the company has ~28% market share in India. Solar, with a 70% market share in exports from India, exports to 51 countries around the world. Economic Explosives, a 100% subsidiary, manufactures detonators. Solar has manufacturing facilities spread across 25 locations and eight states in India. In recent years expanded its manufacturing base to Nigeria, Zambia, South...

1. Founded in 1955 by Shri Satyanarayan Nandlal Nuwal. 2. Solar Group is a leading company with the global marketplace in the explosive business. With an...