Solar Industries India share price hits a record high, jumps over 75% YTD; should you buy this defence stock?

Solar Industries India share price climbed 1.5 per cent in intraday trade on the BSE on Tuesday, June 17, to hit its fresh record high of ₹17,274.90. The defence stock looked set to extend its winning streak to the fourth consecutive session.

Solar Industries' share price has seen solid gains in the recent past. Considering the defence stock's fresh high, it has surged 76 per cent year-to-date (YTD), while on a monthly scale, it has been in the green since March this year. In June so far, the stock has risen 7 per cent.

Meanwhile, SBI Mutual Fund sold 20,413 shares of the company on May 30 in the market.

Before the disposal of the shares, SBI Mutual Fund, under its various schemes, held 33,75,923 shares, or 3.7307 per cent stake, of the company which stood at 33,55,510 shares, or 3.7082 per cent stake, after the share sale.

Solar Industries India: Should you buy this defence stock?

Experts point out the company's long-term growth potential. However, the sharp rise in stock prices has inflated its valuation.

Nirmal Bang Equities has downgraded the stock to hold, with a target price of ₹16,651, valuing it at 57 times March 27E EPS (earnings per share), which is +2SD above its five-year average.

"Revenue, EBITDA, and PAT growth CAGR during FY25-FY27E stands at 36 per cent, 38 per cent, and 47 per cent, respectively. The stock is trading at a one-year forward PE (price-to-earnings ratio) of 58 times, above the five-year average PE of 40 times," said Nirmal Bang.

Nirmal Bang highlighted that the company's management expects revenue to grow around 33 per cent to ₹10,000 crore in FY26.

The defence segment will account for 30 per cent of this revenue, amounting to ₹3,000 crore. Revenue from explosives is projected to grow in the range of 15-20 per cent. The revenue from defence is anticipated to reach approximately ₹8,000 crore over the next four to five years. EBITDA margin is expected to be around 27 per cent or higher, Nirmal Bang said.

The brokerage firm further said that the management has indicated that the capital expenditure for FY26 is projected to be approximately ₹2,500 crore, which is expected to enable the company to unlock new opportunities. The funding will be sourced from a combination of internal accruals and debt financing.

Technical experts also see the possibility of profit booking due to the stock's stretched valuation.

Anshul Jain, the head of research at Lakshmishree Investments, pointed out that Solar Industries rallied 103 per cent in just 16 weeks post a breakout from a weekly flag pattern at ₹9,700.

"The stock is now significantly extended from its short- and long-term moving averages, signalling an overbought condition. Given the steep run-up and stretched technical structure, profit booking is highly likely. A healthy pullback or consolidation phase would help reset the base for any sustainable up-move ahead. Caution is advised at current levels," said Jain.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.