MOSL: SOLAR INDUSTRIES (Neutral)- In-line performance; defense showing traction
Solar Industries: In-line performance; defense showing traction
(SOIL IN, Mkt Cap USD1.4b, CMP INR1075, TP INR1230, 14% Upside, Neutral)
- Operational performance in line with expectations: 4QFY19 consol. revenue increased 17.0% YoY to INR6.7b (v/s our estimate of INR6.8b), supported by growth in volume (10%) and realization (5%). EBIDTA grew 21% YoY to INR1.4b (in-line with our estimate of INR1.4b). Margin improved 60bp YoY to 21.1% (marginally below our estimate of 21.3%) due to (a) raw material price (ammonium nitrate) increase not being completely passed on to the end consumer, and (b) forex loss of INR17m being impacted due to INR appreciation. Adj. net profit grew 18% YoY to INR776m (ahead of our estimate of INR716m) on account of lower-than-estimated tax rate (33.6% v/s our estimate of 35%). In FY19, revenue/EBIDTA/PAT grew 29%/22%/21%.
- Revenue growth supported by Housing & Infra segment: revenue growth was driven by robust performance in Housing & Infra segment (+43% YoY) and CIL (+19% YoY). Robust growth in CIL was supported by (a) weak base of 4QFY18 (+3% YoY), and (b) better realizations (+10% YoY) due to higher ammonium nitrate prices. Overseas and export revenues declined 16% YoY due to sales slowdown in Zambia and Turkey. SOIL expects overseas sales in Zambia and Turkey to pick up as the economic scenario improves. SOIL expects growth from CIL and SCCL to be healthy in FY20 given the improved demand.
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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