MOSL: SOLAR INDUSTRIES (Neutral)-In-line performance-overseas and exports business drives growth
Solar Industries: In-line performance; overseas and exports business drives growth
(SOIL IN, Mkt Cap USD1.2b, CMP INR1000, TP INR1100, 10% Upside, Neutral)
- Operational performance in line with expectations: revenue increased 27.5% YoY to INR5.2b (our estimate: INR4.9b) in 2QFY19. EBIDTA grew 23.1% YoY to INR1.1b (in-line); margin contracted 80bp YoY to 20.6%, below our estimate of 21.5% due to an adverse product mix and forex loss (INR50m) on account of foreign exchange volatility. Adj. net profit grew 13.7% YoY to INR520m, missing our estimate of INR547m on account of increased finance charges (INR127m v/s our estimate of INR91m) and a higher tax rate (33.9% v/s our estimate of 32%). In 1HFY19, revenue/EBIDTA/PAT grew 30%/25%/19%. For 2HFY19, we expect revenue/EBIDTA/PAT growth of 16%/11%/14%.
- Overseas and exports segment and better Coal India demand drive revenues: revenue was driven by a robust performance at the overseas and exports segment (+28% YoY). On the domestic front, 2Q saw robust demand from the infra and housing space (+23% YoY) and CIL (+35% YoY). Robust growth from CIL was supported by (a) weak base of 2QFY18 (-25% YoY) and (b) better realizations (+11% YoY) due to higher ammonium nitrate prices. SOIL expects growth from CIL to remain robust, led by more overburden removal.
- Defence showing traction: Revenue from Defense biz stood at INR440m (v/s INR82m in 2QFY18), led by better execution of orders in hand. SOIL expects revenue contribution to reach INR2b in FY19 from INR378m in FY18. Defense order backlog stands at INR4.7b, which it expects to execute by end-FY20.
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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