SOLAR Industries:

It is natural for any one of us to infer something from the title – be it a movie / person / company. For instance, Sun Pharma means it is a Pharma company, Asian Paints means it is a paint company. But this can be misleading / exploited in some instances, as in the case of IT boom in 2000’s. Many company titled themselves / changed their name as INFOTECH / computer company – to ride the fancy of investors. But their actual businesses were different. As expected, investors walked into the trap only to regret later. Only if we understand the actual business of these companies, we could avoid these mistakes.

Here are few facts about SOLAR Industries:

• It has got nothing to do with SOLAR Power
• It is India’s largest producer of Industrial Explosives and also India’s largest exporter of explosives.
• It was established in 1995
• It has 25 manufacturing plants across 8 states in India and 3 manufacturing plants in Zambia, Nigeria and Turkey.
• Another plant is under construction in South Africa, likely to go on stream in 2017.
• Exports to 42 countries.
• Product Range
• Industrial explosives – Bulk and Cartridge
• Detonators
• Detonating fuse
• Cast Boosters
• Key Clients
• Coal India
• Vedenta
• TATA Steel
• Jindal Steel
• SAIL
• L&T
• ACC
• Ultratech Cement
• Lafarge
• Anglo Gold
• Latest development
• Foray into manufacture for defence.
• India’s first private sector domestic supplier of high energy material HMX – key compnent of missile war heads and rocket systems.
• Mutual funds hold 18.13% as on Sept 2016
• Debt equity ratio of 0.47
• PE Ratio of 35.8
• Price to Book value of 7.1
• Return on Networth : 21.9 vs 21  in FY 2014

Though the valuation is expensive (high PE), the utitilization of capital has been quiet effective, with optimal debt.