Stock of this industrial explosives firm hits new high, up 136% in 8 months

Shares of Solar Industries hit an all-time high of Rs 8,686, on rallying 6 per cent in Friday's trading session.

Shares of Solar Industries India (SIIL) hit an all-time high of Rs 8,686.30, as they rallied 6 per cent on the BSE in Friday's intra-day trade amid heavy volumes in an otherwise weak market.

The stock price of this Industrial Explosives maker surpassed its previous high of Rs 8,499 touched on November 20, 2023. In past eight months, it has zoomed 136 per cent from a level of Rs 3,682.85.

The average trading volumes at the counter jumped 1.5 times. A combined 474,000 equity shares changed hands on the NSE and BSE. In comparison, the S&P BSE Sensex was down 0.5 per cent at 72,758 at 01:53 pm.

Thus far in the month of March, in the past 11 trading days, the stock surged 29 per cent. On March 11, Solar Industries had received export orders worth Rs 455 crore for supply of products over next 2 years for use in defence products.

The Solar group is one of the largest domestic manufacturers of bulk and cartridge explosives, detonators, detonating cords and components. It has manufacturing facilities in 29 locations in India, and plants in Nigeria, Zambia, Ghana, South Africa, Turkey and Tanzania (with Indonesia, Thailand and Australia coming up).

The group will continue to maintain its robust market position in the domestic explosives industry and witness healthy revenue growth in the overseas and defence businesses, according to analysts. It is the largest supplier of explosives to Coal India.

In the first nine months of fiscal 2024, SIIL reported net sales of Rs 4,459 crore and operating profit of Rs 1,016 crore.

The company had reported highest ever EBITDA and PAT in absolute and in margin terms for the 9 months, which have been achieved despite lower commodity prices, moderate defense sales and disturbances in shipments on account of Red Sea issues. Otherwise, the numbers would have been much better. The revenue is expected to decline this fiscal owing to declining realisations linked to decreasing raw material prices.

As on December 31, 2023, the domestic explosives order book of Coal India and Singareni stood at Rs 2,589 crore. Given the government's clear focus reiterated in the interim budget and in their strategic vision on mining, the housing and infrastructure augurs well for the industry, the management said.

On March 5, CRISIL Ratings assigned its 'CRISIL AA+/Stable' rating to Rs 45 crore non-convertible debenture (NCD) of Solar Industries India and reaffirmed its 'CRISIL AA+/Stable/CRISIL A1+' ratings on the other debt instrument and bank loan facilities.

Majority of raw materials (apart from ammonium nitrate) such as detonator components, emulsifiers, sodium nitrate and calcium nitrate are manufactured internally, leading to cost savings, quality control and stable operating margin of 18-21 per cent over the five fiscals through 2023. Also, all the bulk explosive manufacturing units are located in 50-60 kilometre radius from the major mining regions. The group has the ability to pass on fluctuations in raw material prices to customers through a price escalation clause in the contracts, the rating agency said.