1

SYNOPSIS

���� Solar Explosives, a solar group

company was incorporated on

February 24, 1995. It is one of the

largest Indian Explosive

manufacturing company .The name

of Solar Explosives Limited got

changed to Solar Industries India

Limited.

���� During the quarter ended, the

robust growth of Net Profit is

increased by 43.91% Rs.209.48

million.

���� Company has approved the final

dividend of 40% i.e. Rs. 4 per share

on equity share of Rs. 10 each

subject to the approval of

shareholders.

���� Net Sales and PAT of the company

are expected to grow at a CAGR of

16% and 22% over 2010 to 2013E

respectively.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 6798.80 1484.73 755.96 43.64 14.44

FY 12E 7750.63 1679.84 946.28 54.62 11.53

FY 13E 8758.21 1880.69 1065.75 61.52 10.24

Stock Data:

Sector: Specialty Chemicals

Face Value Rs. 10.00

52 wk. High/Low (Rs.) 700.00/405.70

Volume (2 wk. Avg.) 1129.00

BSE Code 532725

Market Cap (Rs in mn) 10914.12

Share Holding Pattern

1 Year Comparative Graph

BSE SENSEX SOLAR INDUSTRIES

C.M.P: Rs. 630.00 Target Price: Rs. 712.00 Date: July 4th 2011 BUY

Solar Industries India Ltd Result Update: Q4 FY 11

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Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Solar Industries India 630.00 10914.12 29.03 21.70 4.50 70.00

BASF India Ltd 619.55 26817.60 30.08 20.60 2.72 80.00

Ineos Abs (India) Ltd 628.00 11043.80 40.34 15.57 3.30 40.00

DIC India Ltd 256.95 2358.50 51.62 4.98 0.97 50.00

Investment Highlights

���� Q4 FY11 Results Update

Solar Industries India Ltd has posted net profit of Rs 209.48 million for the quarter

ended on March 31, 2011 as against Rs 145.56 million in the same quarter last

year, an increase of 43.91%. It has reported net sales of Rs 2021.11 million for the

quarter ended on March 31, 2011 as against Rs 1565.30 million in the same

quarter last year, a rise of 29.12%. Total income grew by 27.51% to Rs 2110.71

million from Rs.1655.31 million in the same quarter last year. During the quarter,

it reported earnings of Rs 12.09 a share registering growth of 43.91%.

Quarterly Results - Consolidated (Rs in mn)

As At Mar-11 Mar-10 %change

Net sales 2021.11 1565.30 29.12

Net Profit 209.48 145.56 43.91

Basic EPS 12.09 8.40 43.91

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���� Net Sales & Net Profit

During the quarter, Net sales rose by 29.12% to Rs.2021.11 million from

Rs.1565.30 million in the same quarter last year and the Net Profit for the quarter

ended March 31, 2011 was Rs.209.48 million grew by 43.91% from Rs.145.56

million compared to same quarter last year.

���� Growth of EPS

The basic EPS of the company stood at Rs.12.09 for the quarter ended Mar

2011 from Rs.8.40 for the quarter ended Mar 2010.

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���� Break up of Expenditure

���� Segment Revenue

FY11 FY10

Explosives 5766.97 4354.03

Trading 787.16 1032.87

Others 244.67 217.72

Total 6798.80 5604.62

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���� Board approves Final Dividend

Solar Industries India Ltd has approved the Final Dividend of 40% i.e. Rs. 4 per

share on equity share of Rs. 10 each subject to the approval of shareholders.

Company Profile

Solar Explosives Limited, a Solar group company was incorporated on February 24,

1995 by Satyanarayan Nuwal, Nandlal Nuwal and Kailashchandra Nuwal. The journey

of “Solar” Group started in the year 1984 when a proprietary firm Solar Explosives was

formed by Satyanarayan Nuwal for trading in Explosives. In this year one of the, then

largest Indian Explosive manufacturing company awarded its first consignment

agency to Solar Explosives. The name of Solar Explosives Limited got changed to Solar

Industries India Limited and the trading symbol of the Company on NSE was changed

from SOLAREX to SOLARINDS with effect from April 13, 2009.

The Solar group has a two decade reputation in the explosives industry, starting out

as a trading organization it soon became the nation's biggest explosives trading entity.

The Solar Group has a licensed & installed capacity of 175, 000 MT of Explosives, 140

million Detonators & 20 million meters of detonating fuse. The manufacturing facility

of the company is located at Village Chakdoh, 37 kms from Nagpur and is spread over

an area of 150 acres. This ISO 9001 certified facility with a licensed capacity of 80,000

TPA of all kinds of explosives is the largest manufacturer of packaged explosives in

India.

Products manufactured by the company

The company is one of the largest manufacturers and suppliers of Explosives and

Explosive Accessories in India covering the entire range of products such as Bulk and

Cartridge Explosives, Detonators, Detonating Cords, Pentaerythritol Tetranitrate

(PETN), and Cast Boosters. It has manufacturing facilities strategically located in and

around Nagpur spread over a total area of 350 acres. Four out of six of their Explosive

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manufacturing units are ISO 9001 certified by Det Norske Veritas (DNV) of

Netherlands.

Clientele

The company supplies its products to major public and private sector companies like

Coal India Limited and its subsidiaries, Steel Authority of India Limited, Singareni

Collieries Company Limited, and Hindustan Zinc Limited. The Company also supply to

various national hydroelectric projects, cement industry, infrastructure and

construction sector, Border Roads Organization etc.

Its products are also exported to countries like Indonesia, Malaysia, Sri Lanka, Oman,

Jordan, Syria, Lebanon, Ethiopia, Kenya, Uganda, Tanzania, and Nigeria.

Subsidiaries

� Economic Explosives Ltd

� Solar Overseas Mauritius Ltd

� Solar Components Pvt. Ltd

� Solar Mines & Minerals Ltd

� Navbharat Coalfields Ltd

� Solar Mining Resources Ltd

� Solar Recursos Minerals LDA

� Solar Industrias LDA

� Solar Agro Florestal LDA

� Solar Overseas Netherlands Cooperative U.A

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Financial Results

12 Months Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) FY10 FY11 FY12E FY13E

Descrption 12m 12m 12m 12m

Net Sales 5604.62 6798.80 7750.63 8758.21

Other Income 229.40 265.89 292.48 321.73

Total Income 5834.02 7064.69 8043.11 9079.94

Expenditure -4714.04 -5579.96 -6363.27 -7199.25

Operating Profit 1119.98 1484.73 1679.84 1880.69

Interest -133.60 -127.59 -131.42 -136.67

Gross profit 986.38 1357.14 1548.42 1744.01

Depreciation -78.50 -84.96 -92.61 -101.87

Exceptional Items 0.00 8.34 0.00 0.00

Profit Before Tax 907.88 1280.52 1455.82 1642.15

Tax -321.95 -450.97 -509.54 -576.39

Profit After Tax 585.93 829.55 946.28 1065.75

Minority Interest 0.00 -73.59 0.00 0.00

Net Profit 585.93 755.96 946.28 1065.75

Equity capital 173.24 173.24 173.24 173.24

Reserves 2479.20 2987.16 3933.44 4999.20

Face value 10.00 10.00 10.00 10.00

EPS 33.82 43.64 54.62 61.52

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Quarterly Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) 30-Sep-10 31-Dec-10 31-Mar-11 30-Jun-11E

Description 3m 3m 3m 3m

Net sales 1504.77 1662.19 2021.11 2142.38

Other income 83.16 59.45 89.60 82.43

Total Income 1587.93 1721.64 2110.71 2224.81

Expenditure -1273.72 -1366.47 -1628.19 -1735.33

Operating profit 314.21 355.17 482.52 489.48

Interest -10.63 -21.27 -65.79 -71.71

Gross profit 303.58 333.90 416.73 417.77

Depreciation -21.26 -22.85 -20.65 -20.03

Exceptional Items 0.00 0.00 8.34 0.00

Profit Before Tax 282.32 311.05 404.42 397.74

Tax -102.04 -106.71 -140.09 -139.21

Profit After Tax 180.28 204.34 264.33 258.53

Minority Interest -9.25 -9.49 -54.85 0.00

Net Profit 171.03 194.85 209.48 258.53

Equity capital 173.24 173.24 173.24 173.24

Face value 10.00 10.00 10.00 10.00

EPS 9.87 11.25 12.09 14.92

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Key Ratios

Particulars FY10 FY11 FY12E FY13E

EBITDA Margin (%) 19.98% 21.84% 21.67% 21.47%

PBT Margin (%) 16.20% 18.83% 18.78% 18.75%

PAT Margin (%) 10.45% 12.20% 12.21% 12.17%

P/E Ratio (x) 18.63 14.44 11.53 10.24

ROE (%) 22.09% 26.25% 23.04% 20.60%

ROCE (%) 32.13% 32.86% 30.54% 28.51%

Debt Equity Ratio 0.41 0.51 0.41 0.34

EV/EBITDA (x) 9.74 7.35 6.50 5.80

Book Value (Rs.) 153.11 182.43 237.05 298.57

P/BV 4.11 3.45 2.66 2.11

Charts:

Net Sales & PAT

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P/E Ratio(x)

Debt Equity Ratio

11

EV/EBITDA(x)

P/BV

12

Outlook and Conclusion

At the current market price of Rs.630.00, the stock is trading at 11.53 x FY12E

and 10.24 x FY13E respectively.

Earning per share (EPS) of the company for the earnings for FY12E and FY13E

is seen at Rs.54.62 and Rs.61.52 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 16% and

22% over 2010 to 2013E respectively.

On the basis of EV/EBITDA, the stock trades at 6.50 x for FY12E and 5.80 x for

FY13E.

Price to Book Value of the stock is expected to be at 2.66 x and 2.11 x

respectively for FY12E and FY13E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.712.00 for Medium to Long term investment.

Industry Overview

The Specialty Chemicals segment in the Indian Chemical Industry is a new emerging

sector which brings promises of huge growth.

Specialty chemicals are those chemicals which are produced at a low volume; they are

high priced and usually targeted at a wide variety of markets. These chemicals are

developed under the user's specifications which usually vary from one user to another.

The methods of development depend on the application and the function of the

chemicals. This industry requires the best technical know how.

The different Specialty chemicals:

���� Diagnostic Aids

���� Adhesives

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���� Paper Additives

���� Flavors & Fragrances

���� Elastomers

���� Foundry Chemicals

���� Industrial Enzymes

���� Cosmetic Additives

���� Dyes

���� Food Additives

���� Metal Plating & Finishing Chemicals

���� Lube Additives

���� Category Specialty Chemicals

���� Industrial Cleaning Agents

���� Fuel Additives

���� Polymer Additives

���� Oilfield chemical

���� Mining Chemicals

���� Photographic Chemicals

���� Paint Additives

���� Construction Chemicals

���� Rubber Chemicals

���� Water Management Chemicals

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���� Surfactants

���� Textile Auxiliaries

���� Electronic Chemicals.

The Specialty Chemicals segment is disunited with a huge number of companies.

TNCs have a stellar inherence in this sector. Many of the present textile

manufacturers are emerging as specialty chemical developers.

Major companies in the Specialty chemicals segment:

� ClariantIndia Ltd

� Ciba Specialty Chemicals

� Color Chem

� BASF

� Foseco

� Hindustan Organic Chemicals

� Balmer Lawrie

Major consumers in the Specialty chemicals segment:

� Textile industry

� Leather industry

� Paper industry

� Detergent industry

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� Rubber industry

� Paints industry

� Agro chemical industry

� Oil & gas industries.

Market Characteristics

� The specialty chemicals segment is estimated around US $ 465 million

� The industry has emerged from textile auxiliary chemical industry.

Key Success Factors

� Application of superb engineering skills for better chemical formulations

� Customization of the chemicals for specific end users requirements

� Technical knowhow to be imported for better production

� More export oriented productions

� Formulation of policies for the better functioning of the industry.

Future of the Specialty chemicals segment:

� Focus on improvement in efficient processes for enhanced productivity

� India to be one of the main source of base materials

The demand of the segment depends on the demand of the end users.

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_____________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

17

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