At a Glance (Excerpt Only)
From mining pits to defence kits, Solar Industries has become India’s homegrown arms dealer—legally. With 35% profit CAGR, 37% ROCE, and zero serious competitors, the only thing more explosive than their products is their 127x P/E. But is this rally sustainable, or is valuation about to self-detonate?
📊 1. Financial Recap (FY21–FY25)
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 | 5Y CAGR |
|---|---|---|---|---|---|---|
| Revenue (₹ Cr) | 2,516 | 3,948 | 6,918 | 6,070 | 7,540 | 28% |
| Net Profit (₹ Cr) | 288 | 455 | 811 | 875 | 1,288 | 35% |
| Operating Profit (₹ Cr) | 515 | 748 | 1,336 | 1,482 | 1,960 | 33% |
| OPM (%) | 20% | 19% | 19% | 24% | 26% | Upward |
| ROCE (%) | 19% | 25% | 36% | 32% | 37% | 💪 Strong |
| EPS (₹) | 30.5 | 48.8 | 83.7 | 92.4 | 133.7 | 🚀 Massive |
💣 From ₹2,500 Cr revenue in FY21 to ₹7,500 Cr in FY25 — a 3x scale-up without blowing up their margins.
🏹 2. What’s Fueling This Surge?
- 🇮🇳 Defence Domination: From zero to ₹1,000+ Cr in annual defence orders in 3 years
- 🚀 Space + Strategic Segment: Pyros, fuses, and propellants for DRDO & ISRO — imagine Chandrayaan powered by Nagpur
- 🧨 Monopoly in Explosives: 70%+ market share in India; Coal India and Ministry of Defence are frequent flyers
- 🌍 Global Reach: Exports to 75+ countries, and counting — literal firepower diplomacy
🧯 3. What’s the Red Flag?
- 🔥 Valuation Overload: At 127x P/E, even Nykaa feels cheap.
- 📉 Dividend Yield: A blink-and-you-miss 0.06% — board prefers storing explosives over rewarding shareholders
- 📦 Working Capital Cycle: CCC has gone from 84 to 111 days — not ideal for a cash-generating industry
- 🧱 Book Value Multiple: 35x — higher than tech stocks, and this one sells detonators, not SaaS
📉 4. Peer Group? LOL.
| Company | P/E | ROCE (%) | OPM (%) | PAT (₹ Cr) | Sales (₹ Cr) |
|---|---|---|---|---|---|
| Solar Inds. | 127.2 | 36.8 | 26.0 | 1,209 | 7,540 |
| Premier Explosives | 109.7 | 16.9 | 13.9 | 28.5 | 417 |
| GOCL Corporation | 17.5 | 9.6 | -4.8 | 106 | 555 |
Verdict: There’s no real peer. Solar is the benchmark.
🛡️ 5. Defence Boom: Hype or Reality?
- 🔐 ₹158 Cr MoD order signed in June 2025
- 🔫 ₹402 Cr order from Coal India in May 2025
- 🚀 DRDO-backed expansion into missile warhead components, fuzes, and propellants
- 📦 86% of FY24 sales still from industrial explosives, but defence segment is now ~₹1,000 Cr+ annually
🧠 Strategic Moat Alert: Defence & space customers don’t switch suppliers casually — this is a deep moat.
💰 6. EduInvesting FV Estimate
Let’s do some basic math:
- FY25 EPS = ₹133.7
- Fair PE (high-growth, monopoly defence + industrial) = 40–55x
📈 Fair Value Range = ₹5,350 – ₹7,350
🎯 CMP = ₹17,000
🚨 Overvalued by 130–200% based on realistic growth expectations
Even at PEG = 1 (P/E = growth rate), a 35% EPS CAGR justifies P/E ~35, not 127
🚀 7. Final Verdict: Priced Like a Missile, But You’re Paying for the Launchpad
✅ Business = Rock solid
✅ Moat = Real
❌ Valuation = 🤯
❌ Dividend = Forgettable
🧨 Risk = One bad quarter or regulation shift, and this stock will detonate faster than its own ammonium nitrate
Unless you think India will quadruple defence spending overnight, current price assumes Solar will be the Lockheed Martin of Asia — next year.
Until then… great company, but terrible time to enter.
✍️ Written by Prashant | 📅 June 26, 2025
Tags: Solar Industries, defence stocks, explosives, missile fuze stocks, DRDO vendors, multibagger defence, overpriced stocks India, EduInvesting
