The stock is trading at a 1-year forward P/E of 48x, above the 5-year average P/E of 42x. The stock has rallied 48% since we initiated it on 18-Mar-25. We upgrade the stock to BUY and value it at 57x Jun-27E EPS, which is +2SD above its 5-year average, supported by a healthy order book significantly exceeding historical levels, implying an upside of 23% with a target price of Rs17,720/sh.
We recently hosted the management of Solar Industries (SOIL) for an interaction with investors. Key points: 1) Defence and exports & overseas segments could shepherd growth over the next five years; 2) EBITDA margin may sustain at ~27% over the next few years; 3) capex intensity could significantly rise in next five years; 4) favourable macro environment in ammunitions may be a significant tailwind; and 5) focus on indigenisation remains intact. We believe the recent stock price correction provides a good entry point in SOIL. Going forward, growth is likely to be driven by high-margin segments, and SOIL could go further up in value chain to platforms from materials. Retain BUY with an unchanged TP of INR 13,720 on 60x FY27E EPS
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