Elara Capital has initiated coverage on Solar Industries with a 'Buy' rating and target price of ₹15,450, implying an upside potential of 24% from the previous close of ₹12,430 per share. According to reports from The Economic Times, shares rallied as much as 5.4% to their day's high of ₹13,251 on the BSE following the brokerage's positive initiation. 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.
The defence segment has demonstrated exceptional growth momentum, with revenue growing at a CAGR of 82% over FY21-25, increasing its contribution from just 5% of total sales in FY21 to 18% in FY25. As reported by The Economic Times, this segment is expected to drive the next phase of strong growth, supported by India's defence capital expenditure of ₹2.2 lakh crore in FY27. The company remains the only player in India with presence across all four key modern warfare categories: missiles and rockets, drones, counter-drone systems and ammunition. Elara Capital expects defence revenue to grow at a CAGR of 66% over FY25-28E, with its share in overall revenue rising to 42% by FY28E.
The company has significantly strengthened its international presence, now operating in more than 90 countries with seven overseas manufacturing facilities across Zambia, Nigeria, Turkey, South Africa, Indonesia, Tanzania and Ghana. According to The Economic Times, 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.
The company is stepping up its defence ambitions with a significant capital expenditure plan of ₹2,200 crore over FY26-28E to scale up existing capabilities and explore new opportunities in areas such as advanced ammunition and aerospace solutions. As reported by The Economic Times, 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 ₹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.
According to The Economic Times, the company reported an EBITDA margin of 26% in FY25, along with a return on capital employed of around 37% and return on equity of 31%, underscoring its operational strength and efficiency. The brokerage highlights that 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.
