Solar Industries share price surged 7 percent intraday Thursday after research house Ventura Securities has initiated coverage with Buy rating on the stock.
The brokerage house has set a target price for the stock at Rs 1,537, implying a potential upside of 37 percent over 27 months.
Incisive business strategy, enviable financial performance, regulatory compliant and well managed capex are compelling case for premium valuation, Ventura said.
Solar Industries is dominant player in the explosives industry and 5x of its nearest peer.
Infrastructure growth and mining boom will boost demand for explosives, Ventura said, adding opening up of Indian defence and tapping international markets is positive for the company.
The research house expects healthy operating cash flows going ahead and expects revenue/EBITDA/net profit to grow at CAGR of 25.3 / 27.2 / 28.6 percent over FY17-20.
It also expects return on equity / return on capital employed to expand by 157 / 357 bps to 21.7 / 28.7 percent by FY20.
Net debt to equity will be maintained at 0.4x in future, the research house said.
The country's largest manufacturer and exporter of commercial explosives reported a 24 percent growth year-on-year in second quarter profit at Rs 45.74 crore and 30 percent growth in net sales at Rs 408.40 crore YoY.