Solar Industries India Ltd. shares hit a new 52-week high on Monday, continuing their stunning rally in the past six months and just kept at its highest level in more than six months. The defence and explosives manufacturer has grown nearly 50% since August 2016, far better than many other companies in industry and well ahead of the market but still outperforming the rest of the market as benchmark indices remain under pressure.
The stock rose nearly 3% from around ₹18,990 during intraday trading to a new 52-week high of around ₹18,990 on the BSE and then receded at the end of the day because the stock wasn’t able to deliver the gains. It’s a good result that has been fuelled by increasing investor optimism among investors to see that the company has a good order pipeline and is expanding defence business and the company has a good earnings outlook, and those are the reason for this.
One of the reasons for the rally is Solar Industries’ increasing presence in India’s defence sector. Solar Industries has a defence division Economic Explosives Ltd. (EC Explosives Ltd.) that makes rockets, missiles, ammunition, drones and explosives and other defence products. Investors’ confidence in the stock has also been bolstered by the high level of investment in the stock due to the increased government spending on indigenous defence production in India and the "Make in India" program.
Our traditional explosives business is doing so well and is still successful. Solar Industries is one of India's best producers of industrial explosives used in mining, infrastructure and construction projects. Strong demand from these sectors and a consistent execution of large orders has driven revenue and profit growth in the company.
So are brokerages who are positive about the stock given the good earnings visibility, growing defence order book and long-term growth prospects. Investors also like that the company is able to make the most out of India’s increasing defence self-reliance and the increasing capital expenditure in infrastructure and mining.
Many investors still see strong fundamentals as Solar Industries has been able to hold up well supported by diversified operations and a strong balance sheet, in spite of its strong fundamentals. But market professionals say investors need to be cautious on the recent surge to keep in mind after the recent run up as profit booking can cause some short-term volatility.
With defence manufacturing becoming one of India’s fastest growing sectors, Solar Industries will be able to reap the benefits from the opportunities to grow and develop in the future too. Defence contracts are being executed, expansion into advanced military technologies and sustained demand for industrial explosives business in the next few years will remain key growth drivers in the future.
Comments
Please to leave a comment on this article.