With a target price of Rs 15,450, the brokerage implies an upside potential of 24% from the previous close of Rs 12,430 per share. Analysts said one of the world’s largest commercial explosives companies is entering its next phase of growth across the defence, explosives and mining value chain.
The company is evolving from a strong industrial explosives franchise into a vertically integrated defence manufacturer, positioning itself to tap high entry barrier segments such as propellants, warheads and rocket integration, ammunition, military drones and unmanned aerial vehicles, counter-drone systems and anti-tank guided missiles. At the same time, its international non-defence explosives business is also gaining solid traction.
The initiation comes at a crucial juncture for defence stocks, amid the ongoing Iran conflict and heightened geopolitical tensions. Here are the three key growth drivers for the company, according to Elara Capital.
1.) Defence to fire growth: Revenue from the segment has grown sharply at a CAGR of 82% over FY21-25, increasing its contribution from just 5% of total sales in FY21 to 18% in FY25. This segment is expected to drive the next phase of strong growth, supported by India’s defence capital expenditure of Rs 2.2 lakh crore in FY27, along with rising global conflicts and higher defence spending worldwide.
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Modern warfare is increasingly centred around four key categories: missiles and rockets, drones, counter-drone systems and ammunition. The company remains the only player in India with a presence across all these segments, positioning it as a key beneficiary. Its in-house capabilities in defence explosives, including warheads, are likely to further accelerate growth. “We expect defence revenue to grow at a CAGR of 66% over FY25-28E, with its share in overall revenue rising to 42% by FY28E,” it said in a note.
2.) Going global: Global footprint expansion continues to drive growth in the explosives segment, with the company significantly strengthening its international presence. The company now operates in more than 90 countries and has established seven overseas manufacturing facilities across Zambia, Nigeria, Turkey, South Africa, Indonesia, Tanzania and Ghana. International business already contributes about 38% of total revenue in FY25, highlighting its strong global scale. Looking ahead, further momentum is expected with new operations planned in Kazakhstan, Saudi Arabia and Thailand over the next two years. This expansion is likely to support an exports CAGR of around 19% during FY25-28.3.) Defence Capex plan: The company is stepping up its defence ambitions with a significant capital expenditure plan. The company intends to invest Rs 2,200 crore over FY26-28E to scale up existing capabilities and explore new opportunities in areas such as advanced ammunition and aerospace solutions. This capex will be funded through a mix of internal accruals and debt.
The push is supported by a memorandum of understanding with the Government of Maharashtra for a large defence project worth Rs 12,700 crore over the next 10 years. The initiative aims to expand production across key segments, including drones and UAVs, counter-drone systems, energetic materials, next-generation explosives and robotics.
India’s defence story is expected to benefit from increasing indigenisation and a widening global ammunition supply gap. Rising geopolitical tensions, particularly in West Asia, along with the Russia-Ukraine conflict and growing risks across maritime, aerial and land domains, have created what can be described as a “security super cycle,” driving record-high global military spending and supporting sustained growth in the defence sector.
Against this backdrop, Solar Industries stands out with strong fundamentals. The company reported an EBITDA margin of 26% in FY25, along with a return on capital employed of around 37% and a return on equity of 31%, underscoring its operational strength and efficiency.
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