Hem Securities Bets On This Multibagger Chemicals Sector Stock, Recommends Buy For High Returns

Hem Securities is positive on Solar Industries India Limited, recommends "buy" for a target price of Rs 4,620 per share. According to the given target price, the stock is likely to witness a potential upside of up to 15% from its current level. Solar Industries is one of the world's leading manufacturers of packaged explosives, bulk explosives, and initiating systems, which find applications in the mining, infrastructure and construction industries.

Stock Outlook & Returns On Investments

The current market price of the stock is Rs 4,040.20/share on NSE, gaining 1.14% from its previous close. The stock recorded its 52 week high on 11 November 2022 at Rs 4,268.95 and its 52 week low on 12 January 2022 at Rs 2,163.55, respectively. It is a midcap stock having a market capitalisation of Rs 36,559.79 crore.

 In a week, the stock moved up 0.79%, whereas, it moved down by 2.55% in the past 1 month. The stock in the past 3 months moved up by 13.3%. It has given 52.9% in the past 1 year. The stock has given 289.77% multibagger returns in the past 3 years. In the past 5 years, it has given 253.75% multibagger returns. 

Key Highlights

• In Q2F23, the consolidated revenue grew up by 99% at Rs 1,567 crores versus Rs 788 crores. 
• Explosives revenue was up by 90%. Realization of explosives has increased by almost 73%, that is Rs 70,900 versus Rs 40,874 during Q3FY23. 
• Initiating Systems revenue increased by 50%. However, Coal India's contribution of revenue stood at 13% compared to 15% whereas revenues increased by 67% year-on-year to Rs 198 crores from Rs 118 crores. 
• PBT has increased by massive 144% from Rs 104 crores to Rs 254 crores & PAT has increased by 152% from Rs 75 crores to INR Rs crores in Q3FY23.

Management Commentary

Management have given a guidance of 15% volume growth for the whole financial year as more volumes are expected in the second half since the first half always have lower demand due to monsoon. The export volumes are also expected to be around 15% to 16% year-on-year basis. The management has revised revenue guidance of around 50% instead of 30% on the basis of better realization in input prices and the improved sales from its overseas subsidiaries and management stated that defense business has also given an upward trajectory. Going forward, for the whole year , company maintain the EBIDTA guidance of 18% to 20% & 11% to 12% for PAT. Management indicated that the share of Coal India, which was around, 14%-15% on the half yearly basis will be likely to remain around 10% to 15% & will not cross more than that. Company's overseas expansions are materializing in the last few years. South Africa, Australia has started given the better results as compare to last financial year. Since, company is having growth from across the all geographies hence based on that company is likely to have around 15% volume growth, from India as well as outside. For the current year, company have a capex plan of around Rs 300 crores to Rs 500 crores. As a part of its policy, company have been maintaining the debt equity around 0.5 or lower than 0.5.

Valuation & Outlook

The company is currently trading at 48x of FY23E eps & 39x of FY24E eps. Company has shown strong financial performance along with robust orderbook of Rs 4008 Cr. Company's strategy to grow overseas businesses, expanding non-coal India markets and defense continues to boost its performances. Exports and overseas business has outperformed by showing a growth of 107% year-on-year.

"Defense business has achieved another milestone by crossing INR 100 crores in this quarter. Therefore, company after establishing in Indian ammunition market, is looking forward for export opportunities that are providing a new avenue of growth and company is first private sector company in India to receive order for exports. This in turn lead the management to revise its annual revenue growth for FY23 from 30% to around 50% Hence, we recommend BUY on stock with price target of Rs 4620 ( up 15%) in medium term," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Hem Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.