Solar Industries India Limited (SOLARINDS) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Solar Industries India Limited Q2 F527 earnings conference call hosted by Motilang Oswald Financial Services Limited. As a reminder, all participant lines will be in the lesson-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touch-turn phone. Please note that this conference is being recorded. In our hand, the conference over to Ms. Seena Bramani from Motila Lospal Financial Services. Thank you, and over to you, ma'am.

Thank you, Neera. Good morning, everyone. On behalf of Motila Lospal Financial Services, we welcome you all for Solar Industries Q2FI27 Result Conference Call. We would like to thank the management for giving us an opportunity to host the call. And from the management side, we have with us Mr. Manish Nawal, Managing Director and CEO, Mr. Suresh Menon, Executive Director, Mr. Milind Deshmukh, Executive Director, Mr. Maunish Agarwal, Joint CFO, and Mr. Shalini Mandhana, Joint CFO. Without taking much time, I hand it over to Mr. Shalini Mandhana for the opening remarks, and then we will open the floor for Q&A. Over to you, ma'am.

Thank you, Athena. A very good morning to all our dear stakeholders and managers. I would like to welcome you all to the solar industry's second quarter and half-year conference call of financial year 2027. This call's recording, including the transcript, will be available on the site. To begin with, I would like to remind that during this call, we might make projections or other forward-looking statements regarding future events and about the future financial performance. Please remember that such statements are only predictions. Actual events or results may differ materially, and our website will be updated with all the relevant information. Now, I would request Solar Industries Managing Director and CEO, Mr. Manishin Nuval, for his opening remarks on the company's performance, followed by Q&A.

A very good morning to all our valued stakeholders. We are pleased to report another quarter of strong and broad-based performance. Consolidated revenue was 3,519 crores for the quarters and 7,187 crores for the first half, representing year-on-year growth of 69% and 70% respectively. Quarterly EBITDA was 1,021 crores with a margin of 29.02% and profit after tax was 650 crores. For the first half, EBITDA and profit after tax were 2,045 crores and 1,316 crores respectively. Performance was supported by contribution from domestic market, international business, and defense. The results reflect the resilience of our business model, disciplined execution, and the benefits of our strategic investments. On domestic explosive front, our business has delivered a healthy performance during the quarter, supported by demand from the mining and infrastructure sector, stronger customer engagement, and expanded manufacturing footprints, and technical services capabilities, which is enabling us to serve our customer efficiently and participate in India's long-term mining and infrastructure growth. Although this quarter is a monsoon period, but our company has delivered a superb performance from domestic market. Our international explosive business maintains its momentum, supported by deeper customer relationship, improved market penetration, and sustained demand across key operating geographies. Our integrated portfolio of explosives, initiating systems, and technical services supports our position as a long-term partner to global mining customers. We remain focused on scaling our international operations. True acquisitions and greenfield expansions. As far as defense is concerned, this business from defense has grown supported by execution of the existing orders book and an expanding product portfolio which are being indigenously developed and opportunities in domestic and international markets. Our capabilities across the ammunition value chain, the order pipeline, execution of key programs, and ongoing customer engagement support our confidence in our long-term prospects. We are likely to get large orders from internationals and Indian defense sectors, which includes guided Pinaka rockets in near futures. On Outlook for the company's second half performance, If you look at the company's first-half performance, together with momentum across domestic, international, and defense, it has reinforced our confidence in its growth trajectory. Based on results, what we achieved, the strength of the order book, and the opportunity available for us, we expect to surpass our stated annual guidance, which we have given at the start of the financial year FY27. Our expanding manufacturing footprints, discipline, capital allocation, technology-led product developments, and broader presence in domestic and international markets provides a foundation for sustainable growth. We will remain focused on operational excellence, timely executions, prudent growth, and the creation of long-term value for our stakeholders. Now, I hand it over to Shalini to take you through the financials. Thank you.

Thank you, sir. The numbers for the quarter and half-year are as follows. The consolidated revenue for the quarter is 3519 crores versus 2082 crores and for half-year stands at 7187 crores versus 4237 crores. Similarly, the EBITDA for the quarter stands at 1021 crores versus 582 crores and for half-year at 2045 crores versus 1146 crores. The consolidated PBT for the quarter is 877 crores versus 490 crores and for half-year it is 1789 crores versus 970 crores. The consolidated fat for the quarter is 650 crores versus 361 crores, and for half-year, it's 1316 crores versus 714 crores. The percentages of the sectors in the customer basket for quarter and quarter basis are as follows. Domestic explosives stands at 27% from 29%. International explosives to 43% from 46% and defense revenue has increased to 29% from 24% and stands at 1,002 crores. The percentage sector of the customer basket for half-year are as follows. From 32% from 35% international. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and 1. To answer the question, First question is from the line of Amit Dixon. From Goldman Sachs, please go ahead.

Yeah, hi. Good morning, everyone, and thanks for the opportunity. Congratulations for a very strong fit of numbers. A couple of questions from my side. The first question is essentially on non-defense part of the business. If you look at international business, it has shown, I mean, very strong growth this quarter, both on YOI and QOQ perspective, as well as in domestic explosive business, we also see that Coal India has reported record of tape. So things are picking up there also. So what would be your guidance in terms of, you know, let us say volume growth, or how do you see this non-defense part of the business growing for the rest of the year and maybe through a 528? That is the first question, sir.

Yeah, as far as this, thank you, Amit. As far as this non-defense section is concerned, definitely the growth was pretty good in this quarter and in the first half. And looking at the growing demand from coal mining in Indian market, definitely we see that the growth momentum will be better in the second half of the year. If you look into this quarterly results, the demand was quite good due to the lower monsoon or below average monsoon in most of the mining market. The demand was pretty good, and that has resulted into the better sales from domestic market. And as we move forward, definitely, based on our estimation, we see that there will be good growth from domestic market in the second half also.

Okay, sir, one question on defense. I mean, while you mentioned in your Twitter remarks about guided pinaka, and we have seen that some of the large orders like next-gen corvettes and all have started flowing finally. So, do you also expect the order for Bhargavastra sometime this year, or if you can, let us know at what stage it is in?

It will be too early to comment on this question, but just giving you some color on the status as of now, Pinaka order in what we have received almost one and a half year back was around 6,000 crores, and the guided Pinaka, we were in the final stage of negotiation, and we hope that this will get concluded very soon. And the order book now, since we have already given our best price, so we know the size of the value of the order. So that should be around 3,000 crores. So coupled together, all the variants of Pinaka, the order size will be around 9,000 crores from the Pinaka family. So that's a good initiative on our part to enter this whole chain of rockets and missiles and commercialize the product and getting these kind of orders. This is happening for the first time from the private sector. And as far as Bhargava is concerned, like we have said, that we are likely to conclude all our internal trials in this calendar year, and we are still very optimistic that we should be able to complete the trial and conduct the field trial also in this calendar year. So, once we complete this trial, definitely commercialization will start, and there is a huge demand for such kind of products, but as you know, that defense cycle conversion from trial to this stage also takes a long period, I can say years to reach to this stage, and once we reach to this stage, definitely commercial orders will start flowing. So, let us wait for some more time. To give a more clarity on the size of opportunity and when we are likely to get the commercial orders.

Great, sir. Thank you so much and all the best.

Thank you. Thank you very much. Next question is from the line of Amit Anwani from PL Capital. Please go ahead.

Hi, sir. Thanks for the opportunity and congratulations for a very strong set of numbers. So first question, you already alluded the opportunity in Pinaka and Bhagavastad. I just wanted to understand from an ammunition point of view, we were kind of trying to scale up to 155mm shells and increase our addressable market. So any update there? And in defense, are there any other platforms or maybe the consumables where we have reached some scales and the market expansion can happen for us globally? That is my first question.

So, as far as 155mm products are concerned, definitely we are establishing our product into this vertical, and we have set up the facilities also. And in future, we would like to get more orders from international market for these products. And as far as international demand for more such products are concerned, once we establish our counter drone systems in Indian market, definitely this will help us to get some international order also. And as you are aware that we have already started supplying Pinaka rockets to some of the international customers, and it's a push from government of India to sell more and more such product into international market. So definitely, it takes time. So we are also hoping that the more orders should come up from international market for the products like Pinaka and Bhargava in the near future. So, once we commercialize Margvastra, we see that there will be good demand from international markets.

The second question on the Omni acquisition, we have already discussed this in the past, just wanted to have more clarity on the agribusiness which is also coming along with the Omni acquisition, how value-accretive that business will be and are we going to ramp up that or in overall mix it will further reduce once we combine the entities. More clarity on that will help.

On Omnia front, we have a detailed call a couple of months back, and there is more updates to be provided at this stage. So, your questions can be answered once the acquisition is completed.

Thank you, sir. Thanks for the answer.

Thank you. Next question is from Vakash Singh from ICICI Securities. Please go ahead.

Good morning, sir. Thank you for the opportunity, and a very congratulation on a good set of numbers. Sir, my first question pertains to, recently, government has made available the missile technologies to the private sector. So, just wanted to understand that, how do you look at, because we were the frontrunners in missiles side. We were the only one who did something from the start. Does this impact our future prospect in a way or do you see this as an additional opportunity to supply the past to these guys?

Thank you, Vikash. For solar, this opportunity is definitely well aligned with the capabilities which we have built over the years, which span across energetic material, propellants, warheads, and rocket integration, and we also started making missile integrations. At SOLAR, we have identified and it's in public domain that we are one of the most competent private sector partners for such kind of technical missile programs. So, all this development provides plenty of opportunity to definitely expand our current participation, which started majorly from Binaka rocket program into the new missile programs. And we are part of some critical missile development programs, and it is in public domain. So, we believe that these kind of initiatives will definitely help companies like us from the defense private sector segment.

No, sir. My second question pertains to any update on the mail UAV. We were also wanted to participate in it, but suddenly the news flows have been dried up. Any progress which has been made on that account, and where are we in terms of? Fantastic, right?

Male UAV is definitely a strategic program, and as we have already shared that we are developing these products indigenously. So we will take our own time. We are not concerned about the current procurement programs, although we have participated in that. So we are working quite well in that direction, and once those come up, we will definitely participate in. So, as such, we are not impacted by current development as far as procurement of these programs are concerned.

No, sir. That's all from my side. Thank you, and happy Diwali to you and your team. Thank you, Vikramish.

Thank you. Next question is from the name of Amit Mahabhar from UBI Securities. Please go ahead.

Hi, sir. Congratulations on great set of results. Amit, sorry to interrupt.

Can you speak a little louder, please?

Yeah. Am I clear now? Yes.

Thank you.

Hi. Yeah. Sir, I just have one question. You scaled up very well this far on the defense platforms and obviously to lead the growth for the next two or three years. Which are the capability gaps that you would want to address looking at your... Domestic pipeline and the export inquiry pipeline, etc. So if you can spend some time on giving us clarity on, you know, where is that we are going to focus on upgrading our capabilities and a lot of capacity will be needed for a lot of programs if and as when you succeed.

Yeah, as you all know, that defense is a very complex business segment in which we have entered almost 15 years back. So, always it's challenging to adopt the new technologies or develop the program to provide solutions for the country's security. So, as technologies are evolving, as the geopolitical situations are changing, so there are more complex requirements from the end users. And at Solar, after finishing or creating one of the most integrated, state-of-the-art, large facilities, which can handle practically every kind of ammunitions, Now, we are focusing on developing the programs along with DRU and on our own also. So, as we move forward, definitely in every business, you find gaps and you have to work towards finding the gaps. So, it's a continuous process. It's not like a gap which we will identify now or we have not identified in the past. It's a continuous process and it's a journey which everybody has to travel always. We are confident that we should be able to adapt all these new things and offer the very smart and best of the products to the end users.

Sure. And second and quick question is, in FY28 and FY29 broadly, and you would have answered, you know, in some format this question previously, but what size of defense domestic and export business with breakup will you foresee for FY28 and FY29? Thank you.

So, this call is basically for the quarterly results and half-yearly updates. So, I would like to answer all these in the next, once we share the financial results of FI27, we would be able to give any sort of clarity for FI27-28, or we will try to offer some clarity for FI28-29. So, as of now, we will restrict our discussion to this quarter and half-yearly results.

Sure. Thank you.

Thank you very much. Next question is from the line of Tanmay, from Aditya Burla Sun Life. Please go ahead.

Hi. Thank you so much for the opportunity and congratulations on the great set of results. My question is on full year guidance that we have given. So around 14,000 crores is what we expect by end of FY27. Whereas we are already around the half mark of that, more than 7,000 crores we have already done, and usually first half is weaker than the second for us. So should we expect the company to substantially beat this guidance of 14,000 crores? And also, regarding the margins, as the current margins have already come around 29%, earlier it used to over around 27% to 28%, and as the difference as a percent of overall revenue share increases beyond 30%, do we expect the EBITDA margins to also go beyond 30%?

Oh, like we have mentioned that we maintain that we will definitely surpass the annual guidance which we have given at the start of the year. And second point is, it's a true that always, whatever we achieve in the first half, in the second half, the sale is always better due to the monsoon or more demand from the domestic market. But if you look at the overall current revenue distribution, domestic market is only now standing at, say, around 27-28%. So, this 27-28% will definitely deliver more in the second half of the year. Otherwise, rest all, we are moving as per our annual guidance. Defense definitely, like we have did in this quarter, 1000 crores, and in the previous Half or the previous quarter, it was around 900 crores. So total is around 1900 to 2000 crores. And as per our annual guidance, we said that we should be able to reach 4500 crores. We still believe that we should be able to cross defense also. And we should be able to cross the total revenue guidance, which we have given of 14000 crores. As far as EBITDA margins are concerned, in the first half, we have almost reached to around 28.45%, and we believe that by the year end, we should be able to cross on an average 29%. So that's definitely a big positive part on the company's performance, which is based on the first half. But anything between 28-29 is definitely more than what we have shared at the beginning of the year, which was around 28%. So definitely we see that we will surpass annual guidance on top line. At the same time, bottom line should also improve. And as you know that currently, due to geopolitical issues, supply chain disruptions, and the commodity prices are also fluctuating a lot. So, it will be too difficult for us to revise guidance looking at these kind of uncertainties. But we are quite confident that we should be able to cross our annual guidance. Okay.

So my next question is regarding the technology. I just wanted to understand how is it shaping the way we manufacture our different equipment and how are we any different from any other different manufacturers around the country and around the globe? And what are we doing different to incorporate the technology and maybe AI too over time in this?

Yeah. Since you are very well aware that solar has created the most advanced, one of the most integrated manifesting facilities coupled with the research and development infrastructure to develop and produce these kind of products, and there are practically hundreds of SKUs in this segment on which we are working. So, if you can come down to Nagpur and see the work, what we are doing, you will be able to understand these things better rather than on a conference call where I can explain all these things because it will take a couple of hours to showcase and explain what we are doing.

Okay, sir. I'll definitely plan for the same. So, this is my last question, and this is regarding the regions. So, I also understand that it is quite sensitive information from where we get our orders, and that's why we do not disclose. But I would still like to understand if you can just give an overview of the regions that we are getting inquiries from, as in any major countries or continents that you can name. For this time, especially.

Yeah, since we have already shared that we are supplying our products to 90 plus countries across the world, so we always keep getting inquiries practically from every nation, whoever requires such kind of product. Definitely, we don't entertain the countries to which the exports are not allowed, and the list of countries which are banned as per the government of India's clarification or notifications. So, we practically entertain customers from every part of the world, whichever is allowed by the combat of India. So, we are getting inquiries, we are getting orders, and that's why you can see that the total order book, what we have as of now, is around 20,178 crores, and in that, defense is. Around 17,568 crores. And we have been repeatedly saying that out of this order book, most of the orders are from international market. So as we are moving forward, as we are expanding our product portfolio, and as we are expanding our global reach, we are getting inquiries and orders from various countries across the world. Okay, sir.

So, that's it on my side, and all the best for the years to come, yeah.

Thank you.

Next question is from the line of Pernatin from HSBC. Please, go ahead.

Yeah, thank you very much, sir. My first question is, what is the quantum of potential orders that you are in negotiations with in terms of amount, either with government or international customers? Can you quantify that?

As far as Pinaka is concerned, I have just answered one of the questions from another speaker, and we have shared that Pinaka order size can be around 3000 crores, and we are expected that it should conclude very soon, and definitely In different sectors, any finalization and signing contract takes a couple of months. But we are very optimistic that we should be able to get this order before the end of this financial year. Sure, sir. Sorry. Please go ahead. And as far as international orders are concerned, we keep getting orders from various countries regularly, and we keep sharing. And we are also negotiating some of the contracts with international customers. And once we receive those orders, we will definitely share with you people.

Got it, sir. Outside of Pinaka, sir, there is nothing right now that you are in discussions with the Indian government or Indian military, right, at this point?

It will not be wise on my part to share details on each and every program. So whatever we share, you can take a lead out of that, that what we are into the negotiation thing. There are a couple of other programs also in which we have participated. But unless all the trials and unless we reach to almost a final stage, it is not wise to just speculate something and share with the stakeholders.

Got it, sir. So my second question is, you mentioned the company's strength in missile manufacturing, and we have seen that they have opened it up to the private sector. Sir, in your view, when can we expect, you know, potential orders to come through in missile manufacturing for you or for the broader industry in the private sector? Is it something which will take years to come through, or is it something which can happen over the next 12 to 18 months?

Basically, we have already participated in a couple of missile programs. And once all the trials are over, once the trials are over, reports are submitted, we should see that the RFP should come up. And based on our past experience, even if we complete trials, let's assume for some of the programs in next 6 to 12 months time, but RFP and then contract finalization will also take another year or one and a half year. So, for next two years or after two years, you should see orders flowing up from the new missile programs for solar.

Got it, sir. And lastly, sir, what is the proposed timeline for closing the Omni acquisition?

Now, can you repeat the question again?

When do you expect to close the acquisition, the Omni acquisition?

So, as far as Omni is concerned, like I said, we have shared enough information with our shareholders in our previous call. So, anything major happens, we will definitely share. So, let us wait for the approvals and other things. And once we receive all sorts of approval, we will share.

Thank you very much.

Thank you.

Thank you. Next question is from the line of Kavish Parekh from 361 Capital. Please go ahead.

Hi, team. Thanks for the opportunity and congratulations on another solid quarter. So, my first question is on commercial explosives. Growth so far has benefited from both higher ammonium nitrate prices and capacity additions domestically. Looking at FY28, once higher prices enter the base and assuming some growth moderation thereafter, how should we realistically think about volume growth from the new capacities? I understand that we don't disclose detailed capacity figures, but could you provide some directional sense of the scale of additions and the growth they could support?

So, looking at our capacity enhancement in different parts of the country and the growing demand from housing infrastructure and coal mining specifically, we expect that there should be a good growth from domestic markets. And the industry growth rate should be around 7% by and large. And we should be able to enhance our growth by or grow every year by around 10 to 15% range. Sometimes it can be 15, 17%. Sometimes it can be 10, 12%. Or sometimes it can be flat also. So, business dynamics keep changing. It will be too early for us to give guidance for FY28 or FY29 for domestic market, but we are quite optimistic and confident that we should be able to grow our domestic business year on year, and that is what we have done in the past 27-29 years.

Just as a follow-up, that 10-15% that you mentioned, you are referring to the volume growth.

Like I said, that industry growth should be around 6-7%, and volume growth, what we are targeting, is around 10-15%.

Understood. Secondly, sir, on 155mm shells, I understand this was mentioned in our media interview this morning that deliveries of an intermediate product have commenced. Could you clarify what exactly is this? Does this refer to the trial variants we have exported to some countries? And as per the commentary, with the final product expected to be ready by end of F27, how should we think about the potential order opportunity? And for this product for 155mm, what could be execution timelines post receipt of the orders?

So, we will share at an appropriate stage about this program, but by and large, we have already shared that the total order book from Difference as of now is around 18,000 crores, and most of the orders are from international market, and all these orders capture variety of products, which includes the products from 155mm also.

Could you, sir, clarify what does that mean? Sorry, I can't tell you.

More clarity on each product is not possible from my side. So, you have to stay with the total order book and the variety of products which we keep sharing. Thank you.

Thank you, sir. Wishing you happy the value in advance. Thank you.

Thank you. Thank you very much. Ladies and gentlemen, we will take that as the last question. And now, hand the conference over to the management for closing comments.

Thank you, everyone, for joining us today and for continued trust and support. On behalf of Sola Industries family, I wish you and your family a very happy and prosperous Diwali. Thank you and have a wonderful festive season.

Thank you very much. On behalf of Motiya and Roswell Financial Services Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines. Thank you.