MOSL: SOLAR INDUSTRIES (Neutral)-Performance impacted by weak demand from CIL
Solar Industries: Performance impacted by weak demand from CIL
(SOIL IN, Mkt Cap USD1.5b, CMP INR1050, TP INR1100, 5% Upside, Neutral)
- Operational performance below expectations: revenue rose 10% YoY to INR4.6b (est. of INR5.6b) in 3QFY18. EBIDTA grew 35% YoY to INR0.9b (est. of INR1.3b), with the margin improving 420bp YoY to 22.4%, helped by strong growth in overseas business. Adj. net profit rose 16.4% YoY to INR577m (est. of INR733m).
- Weak contribution from CIL impacts revenues: revenue was impacted by a weak performance in the domestic (+10% YoY) and overseas (+11% YoY) businesses. On the domestic front, 3Q saw declining demand from CIL (sales down 21% YoY), given weak realization on account of soft AN prices and a delay in procurement from CIL due to shortage of accessories at their end. Realization fell in the cartridge (-18% YoY) and bulk (-27% YoY) segments, as lower raw material cost (ammonium nitrate) was passed on to consumers.
- Operating margin improves 420bp YoY: Operating margin improved 420bp YoY to 22.0%, driven by a better overseas performance. Operating margin in the overseas segment stood at 33.5% v/s 16.8% in 3QFY17, while the standalone operating margin contracted 190bp YoY to 17.0%.
- Overseas business growth led by currency stabilization: Revenue from the overseas business grew 11% YoY, as the currency in the key markets of Nigeria and Turkey stabilized and also as the new facility in South Africa started contributing to revenue from 1QFY18.
Solar Industries India Limited is an explosives manufacturing company. The Company manufactures, supplies and exports industrial explosives and initiating systems. It manufactures various explosives products, such as Slurry and emulsion base explosives, bulk explosives, detonators, pentaerythritol tetranitrate (PETN) and accessories. The Company's products include Large Dia slurry Explosives, Small Dia Emulsion, Small Dia Slurry Explosives, Solar Detonators, Supreme Detonators, Supreme Electric Detonators, Economic Sod, Eco Det, Cord Relay, Cast Booster and Detonating Fuse. Its products are used across mining and infrastructure sectors. It also offers high melting explosive (HMX) and HMX Compounded products to the defense sector. The Company has 25 manufacturing plants eight states in India and three in overseas locations. The Company offers its products to 42 countries across the globe. The Company has manufacturing facilities at Zambia, Nigeria and Turkey.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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