MOSL: SOLAR INDUSTRIES (Neutral)-Operational performance below estimates-Defense contribution disappoints
​Solar Industries: Operational performance below estimates; Defense contribution disappoints
(SOIL IN, Mkt Cap USD1.1b, CMP INR832, TP INR825, 1% Downside, Neutral)
- Operational performance marginally below estimate: Consol. revenue rose 7.6% YoY to INR4.4b (est. of INR5.3b) in 4QFY17. EBIDTA grew 7% YoY to INR919m (est. of INR1.0b), with margin stable YoY at 20.8%, led by adverse product mix. Adj. net profit rose 29% YoY to INR560m (est. of INR585m).
- Revenue aided by strong growth in Bulk segment: Consol. revenue was driven by strong growth in the Bulk segment (+14% YoY). Detonators too grew strongly by 17% YoY. Realization in Bulk (-2% YoY) was under pressure due to competition. Realization fell in Cartridge and Detonating Fuse segments, as raw material cost (ammonium nitrate) decline of 9% YoY was passed on to consumers.
- Operating margins stable: Operating margin was stable YoY at 20.8%. Sales to the institutional sector grew 28% YoY to INR1.4b, while those to the coal sector increased 12% YoY.
- Overseas and exports business grows despite currency devaluation: Revenue from the overseas and exports business grew 7% YoY, despite being impacted by currency devaluation (led to translation loss of INR600m) in the key markets of Nigeria and Turkey.
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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