The brokerage acknowledged that Solar Industries is India’s largest private-sector manufacturer of industrial explosives and one of the country’s fastest-growing defence companies.
It highlighted the company’s diversified portfolio, which includes industrial explosives, high-energy materials, Pinaka rocket systems, loitering munitions and ammunition.
Kotak expects the company to deliver a 28% compound annual growth rate (CAGR) in profit after tax (PAT) between FY26 and FY30.The growth is expected to be driven by a 35% CAGR in the defence business, a 26% CAGR in international operations across 10 countries and improving margins due to a more favourable business mix.
Despite its positive long-term outlook, the brokerage believes the stock’s current valuation adequately reflects these growth prospects.
According to Kotak, Solar Industries is trading at nearly 55 times its estimated FY28 earnings, leaving limited room for further upside and offering an unfavourable risk-reward profile.
The brokerage also highlighted several risks, including cyclical demand from the mining and infrastructure sectors, the lumpy nature of government defence orders, regulatory challenges in the explosives business, execution risks as the company expands into advanced defence technologies such as MALE UAVs and counter-drone systems, and geopolitical risks given that around 35% of its revenue comes from overseas markets and a significant portion of its defence order book is export-oriented.
