Buy Solar Industries India; target of Rs 1183: Cholamandalam securities

Cholamandalam securities' research report on Solar Industries India

Net sales increased by 40% YoY to INR 6.5bn in 3QFY19, driven by robust performance in Overseas & Exports, and Housing & Infra segment. Revenue from overseas & exports segment (37% of total revenue) grew by 42% YoY to INR 2.4bn and Housing & Infra segment, led by government initiatives (25% of total revenue) grew by 38% YoY to INR 1.6bn. Revenues from Coal India Limited (19% of total revenue) grew 51% YoY to INR 1.2n and defence sector (6% of total revenue) showed a massive growth of 313% YoY to INR 409mn. Revenues from explosives grew by 43% YoY to INR 3.5bn led by growth in prices of explosives by 25%YoY to INR 36,920/ton, coupled with a volume growth of 15% YoY to 95,719 MT. Revenue from initiating systems stood at INR 630mn, up 23% YoY. The management anticipates sales volume of explosives ~3,60,000 MT by end of FY19 over 3,30,000 MT in FY18 despite negative OB removal as it expects firm demand from road construction and housing.

Outlook

Strong order book, overseas expansion, anticipation of higher coal production and revival in mining activity and overburden removal coupled with demand from infrastructure segment will be the key growth drivers going forward. At current levels, the stock trades at P/E of 21x its FY21E; we maintain a BUY rating on the stock, assigning P/E of 25x to FY21E EPS to arrive at a target price of INR 1183.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More First Published on Mar 4, 2019 03:50 pm