Solar Industries - All-Round Good Show; Outlook Upbeat; Result Update Q2FY15 :: Edelweiss, PDF link

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Solar Industries (SOIL) posted strong growth in sales, EBITDA and PAT of 15.4%, 28.8% and 40.2% YoY, respectively, for Q2FY15. Performance was in-line with our estimates. Key positives were: 1) domestic sales grew 23% YoY, primarily driven by volume; 2) overseas subsidiaries continued to perform well; and 3) consolidated EBITDA margin spurted 200bps YoY. Management expects consolidated revenue to register 20-25% CAGR (domestic 20-25% and export/overseas subsidiaries 25%) over the next 2-3years, with sustainable EBITDA margin of 18-19%. SOIL is expected to improve its domestic market share in explosives from 28-29% currently to 35% over the next two years. For the defence project, all approvals are in place and orders are expected to flow in during Q4FY15. We believe pick up in infra and construction activities will drive the company’s superior performance going ahead. Commencement of the defence facility will be the next trigger for the stock.

Another strong quarter

Net sales surged 15.4% YoY, primarily led by both domestic (up 23% YoY) and overseas operations (up 62% YoY). It came on improved domestic demand, deficient monsoons, low base and capacity ramp up in overseas operations. However, export revenue plunged 68% YoY (down 18% QoQ) to INR0.13bn owing to lower off-take in African countries. EBITDA margin improved YoY on better operating leverage and higher overseas subsidiaries` sales, which are high-margin businesses. Other expense, as a % of sales, declined by 520bps YoY to 20.3% in Q2FY15 owing to labour related issues at the ports during corresponding quarter of previous year. Reported PAT stood at INR0.37bn versus estimate of INR0.38bn.

LINK
https://www.edelweiss.in/research/Solar-Industries--All-Round-Good-Show;-Outlook-Upbeat;-Result-Update-Q2FY15/27535.html