Despite the ongoing volatility in the markets, Solar Industries Ltd. (SOIL) has managed to outperform its peers, as noted by ICICI Securities. The company’s stable traditional business in India, coupled with a rapidly expanding export segment, has positioned it as a standout performer. However, it’s the defence business that has truly captured ICICI Securities’ attention, with expectations that this sector will drive significant growth in the coming years. As a result, ICICI has raised its price target to ₹16,000, assigning a 70x P/E multiple for the stock.
ICICI Securities is particularly bullish on Solar’s defence business, forecasting a 35% compound annual growth rate (CAGR) in earnings per share (EPS) through fiscal year 2027, compared to fiscal year 2024. This optimistic outlook is based on Solar’s continuous capital expenditure and its diversification into high-potential sectors like defence. The company’s evolving strategy, which includes expanding from consumables to systems and platforms, is expected to align well with global trends such as Europe’s rearmament initiative and increasing ammunition shortages.
One of the standout features of Solar Industries’ growth story is its defence order book, which is expected to grow substantially. ICICI Securities projects that the order book will rise from ₹26 billion at the end of fiscal year 2024 to nearly ₹130 billion by FY25. This growth is largely driven by Solar’s contract to supply systems like the Pinaka rocket launcher, along with investments in next-generation technologies such as drones, counter-drone systems, and military transport aircraft. As a result, ICICI Securities believes that the defence segment will contribute 33–35% of the company’s total revenue by FY30, up from 19–20% in FY25.
Another key driver of growth for Solar is its net cash positive outlook by FY25. This is expected to be fueled by advance payments for the Pinaka missile system orders, coupled with strategic investments in the defence sector. The company has planned to invest up to ₹150 billion by 2030, combining internal accruals with ₹50 billion in debt, which further underscores its commitment to expanding its defence portfolio.
The company’s export segment, which now makes up approximately 50% of its order book, is another area of strength. This diversification reduces customer concentration risks and helps mitigate execution risks. Solar’s ability to secure significant export orders is also a key reason behind the positive outlook on its stock, as it strengthens the company’s position in both domestic and international markets.
With a solid and growing order book, strategic alignment with global defence needs, and the backing of substantial investments, ICICI Securities continues to endorse Solar Industries as its top pick in the defence sector. The company’s capacity to leverage these defence-related opportunities and its potential for sustained expansion make it a compelling stock for long-term growth.
