Growth set to pick-up led by strong industry tailwinds…
About the stock: Premier Explosives (PEL) specializes in producing high-energy materials, including bulk and packaged explosives and initiating systems for mining, infrastructure & construction. Company also manufactures missile and rocket propellants, strap-on motors for satellite launches, and various defence products like chaff, infrared flares, explosive bolts, and tear gas grenades.
• Orderbook at Rs 1297 crore as of Q2FY26 with defence contribution 90%
Q2FY26 Result: Overall operational performance was impacted during the quarter due to weak execution. Revenue declined by 20.1% YoY (-46.8% QoQ) at Rs 75.6 crore in Q2FY26 on account of subdued execution. EBITDA margin stood at 8.6% (v/s 17.6% YoY, 14.7% QoQ) on account of negative operating leverage. Subsequently, EBITDA decreased to Rs 6.5 crore (-61% YoY, -69% QoQ). However, PAT stood at Rs 17.8 crore, an increase of 111.2% YoY, on account of substantial increase in other income
Investment Rationale
• Expanding capacities across defence segment with focus on increasing better-margin products PEL is a leading Indian manufacturer in explosives and defence with six plants across the country. Four units in MP, Maharashtra, and Telangana produce bulk explosives for mining and infrastructure, while two advanced Telangana facilities make defence and space products like detonators, fuses, solid propellants, HMX/RDX, warheads, and rocket ammunition. This gives PEL rare, fully integrated capabilities. PEL is initiating a capital expenditure program to strengthen its defence and energetic materials portfolio. The Katepally facility, which focuses on RDX, HMX, and rocket integration, is set to increase production. A greenfield plant in Odisha is planned in three phases, (~Rs. 800 crores over ten years). Phase I, which includes production of ammunition, warheads, and HTPB raw materials, will require ~Rs 100 crore. To finance these initiatives, PEL aims to raise ~Rs. 300 crores through a Qualified Institutional Placement (QIP) or preferential issue (~Rs. 200 crores, allocated for capex & loan repayment
• Strong order backlog with healthy order inflows: Though Q2FY26 revenue is down 20% YoY (on account of weak execution), the revenue is up 23% YoY during H1FY26. Going forward, management has guided Rs. 500- 600 crore revenue for FY26E (which implies ~35+% YoY growth in H2FY26). With strong manufacturing facilities and increasing capabilities we believe that India’s defence spending and faster procurement will drive stronger order inflows. As of now, the order book stands at ₹1400+ crore (2.2x TTM revenue), with 90% from defence. YTDFY26 orders (₹1200+ crore) already exceed FY20–23 levels and with a two-year execution cycle, visibility is strong.
Rating and Target Price
• PEL is well positioned to witness strong growth in the coming years, led by robust industry tailwinds with focus on better-margin segments. We estimate revenue CAGR of ~27% over FY25-28E while EBITDA & PAT CAGR of ~40% & ~54% respectively over the same period. We maintain BUY on the stock with a target price at ₹ 815 (valued at 42x P/E on FY28E)
