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Solar Industries
Our verdict on Solar Industries isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
The international business significantly outperformed the 15% target, registering 32% year-on-year growth in FY26. (1 exceeded across 1 tracked commitment)
“And next year also, we are expecting a growth of around 30%. So we believe that there are plenty of opportunities for us in the international market.”
The company reported an EBITDA margin of 27.05% for HYFY26, aligning perfectly with the guided target of approximately 27%. (3 met across 3 tracked commitments)
“So, we are confident that we should be able to maintain the EBITDA margins around 27%-28 % as we move forward also.”
See the full cited Management analysis of Solar Industries
How durable is the business?
The Defense segment has seen explosive growth, more than doubling its revenue year-over-year and maintaining a massive order book of over Rs. 15,000 Cr. (5 expanding across 1 engine)
“defense has massively increased to 33% from 20% and has crossed the 4-figure mark reaching INR1,008 crores during the quarter. And in terms of percentage, it is up 134% year-on-year basis.”
Management confirmed a structural improvement in EBITDA margins, now targeting a sustainable 27%-28% range due to the increasing contribution of high-margin defense products. (1 expanding)
“So, we are confident that we should be able to maintain the EBITDA margins around 27%-28 % as we move forward also.”
See the full cited Business Model analysis of Solar Industries
Where does growth come from?
Defense revenue is showing explosive growth, more than doubling year-over-year. While it dipped slightly from the previous quarter (Q4FY25), the annual trajectory is accelerating significantly compared to the prior year's base. (5 accelerating across 5 signals)
“In the year... defense increased magnificently to 27% from 18%. And in number terms, it has almost doubled to INR2,634 crores from INR1,355 crores and up by 94%.”
Management has reaffirmed its guidance to cross the INR 10,000 crore revenue mark for FY26, supported by a 28% YoY increase in Q1 turnover despite seasonal monsoon headwinds in the domestic market. (2 steady, 1 accelerating across 3 signals)
“we are targeting to achieve a revenue of INR14,000 crores in FY '27, while maintaining current margins.”
See the full cited Future Growth analysis of Solar Industries
What could break the thesis?
EASING. Material consumption as a percentage of net sales decreased from 51.65% in Q1FY25 to 50.80% in Q1FY26, suggesting better cost control or pricing power. (5 easing, 1 high-severity)
“Raw material consumption for the quarter stands at INR1,522 crores versus INR1,178 crores. And at the year, it stands at INR4,894 crores versus INR3,979 crores.”
The risk is intensifying as working capital days increased to 90-100 days by Q3 and further in Q4 due to strategic inventory building to mitigate geopolitical risks. (1 intensifying, 1 emerging, 2 easing, 1 stable, 1 high-severity)
“Last year, if you see the financial year '25, '26, working capital is sucked away almost about INR1,600 crores... the working capital days had been -- in this year, it had been hovering around 90 to 100 days till quarter 3. But in quarter 4, so the working capital days have been increased primarily due to higher inventory levels.”
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