Solar Industries India Limited (SOLARINDS.NS) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Solar Industries Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Jyoti Gupta from Nirmal Bang Equities. Thank you, and over to you, ma'am.

Good morning, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to the quarter 3 FY '26 Earnings Conference Call with the management of Solar Industries Limited. The management is represented by Mr. Manish Nuwal, MD and CEO, Mr. Moneesh Agarwal, Joint CFO; Ms. Shalinee Mandhana, Joint CFO; Ms. Aanchal Kewlani, SRM and IRM. Without further delay, I would now request Manish sir to start with his opening remarks, after which, we can open the floor for question and answers. Thank you, and over to you, sir.

Thank you, Jyoti. A very good morning to our dear stakeholders and well wishes. My name is Aanchal, and I would like to welcome you all to Solar Industries Third Quarter and 9 monthly Conference Call of FY '26. This call recording, including the transcript, will be available on the site, the financial statements, quarterly fact sheets, investor presentation, press release are also available on our website and exchange. To begin with, I would like to remind you 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 relevant information timely. Now I would request Solar's CEO and MD, Mr. Manish ji Nuwal for his opening remarks. Over to you, sir.

Thank you, Aanchal. Good afternoon, ladies and gentlemen. It is a privilege to welcome you to our Q3 and 9-month earnings call. Before outlining the quarterly and 9-month results, I would like to extend our heartfelt gratitude to all the stakeholders by sharing a milestone that brings a great joy to our company, the conferment of the Padma Shri, one of the India's highest civilian honors upon our respected Chairman, Shri Satyanarayan ji Nuwal. This award serves as a testament to his distinguished services and contribution to the nation and the defense industry. It is under inspired leadership that we present a quarter defined by record-breaking milestones and relentless growth. Turning to our financial performance. Q3 FY '26 has been our strongest quarter to date with rise in net revenue from INR 1,973 crores to INR 2,548 crores, which is year-on-year, we have registered a strongest quarter again with the growth in revenue by 29%. We achieved highest ever quarterly EBITDA and profit after tax at INR 733 crores and INR 467 crores, registering a growth of 37% and 38% year-on-year, respectively, and highest ever 9 monthly EBITDA and profit after tax at INR 1,879 crores and INR 1,181 crores, registering a growth of 27% and 25%, respectively. This strong momentum is driven by business initiatives, in the explosives and defense sectors. Our international business has crossed INR 1,000 crores revenue in this quarter. which is a significant increase of 35% year-on-year. The global economy is witnessing a steady rise in demand for key commodities and industrial metals. Our extensive and versatile product portfolio supported by continued innovation in specialized explosives and technical services firmly strengthens our competitive market position and help in growing the international business. Solar's defense business showed a splendid growth of 72% by hitting a revenue of INR 700 crores plus in this quarter, evidenced by a record-breaking defense on book of INR 18,000 crores, which takes us to the highest ever total order book of INR 21,000 crores. This growth reflects our capabilities to convert aspirational goals into reality. We are now entering in a new era of growth by strengthening our global and local manufacturing footprint. Our new facility at Dhule, Maharashtra and Dholpur, Rajasthan optimizes and reinforces Solar's position as a dependable, long-term partner to the mining and infrastructure sectors within the country. Our commitment to excellence is powered by continued research and development investments in automation, modern manufacturing technologies, ensuring process consistency and safety at every level. Moving forward, our focus on innovations operational discipline and sustainable growth continues to guide our strategy. With a strong foundation and a clear long-term vision, we are confident in our ability to deliver lasting value and drive a compelling future for the business. Thank you for your continued trust and support. Now I request Aanchal to share the detailed financial numbers.

Thank you, sir. The new year definitely has opened with noteworthy and exceptional milestone for our company. Our beloved Chairman has been honored with prestigious Padma Shri, the visit of honorable Rajnath Singh ji to our defense premises further helped us showcase our capabilities. Capping it all, we achieved record breaking quarterly performance across revenue, EBITDA and PAT surpassing all our previous milestones. We will begin with the quarterly financial update followed by a 9-month update. Highlights quarters are. We achieved highest ever quarterly revenue at INR 2,548 crores, up by 29% highest ever quarterly EBITDA at INR 733 crores, up by 37%, PAT at INR 467 crores, up by 38%. Highest ever defense revenue crossing INR 700 crores, highest ever consolidated order book at INR 21,000 crores plus, including the defense order book of INR 18,000 crores plus. Now the quarter in detailed. The top line grew by 29%. The percent of raw material consumption has decreased from 53.5% to 48.71%. In absolute terms, the cost is around INR 1,241 crores versus INR 1,056 crores in the same quarter previous year. Employee cost is around INR 214 crores versus INR 151 crores. Other expenses is around INR 385 crores versus INR 240 crores. The interest cost is approximately same, which is at INR 34 crores versus INR 31 crores. The depreciation cost is approximately INR 63 crores versus INR 47 crores. Coming to our customers' basket. CIL in the market stands at 10% compared to 13%. Revenue from non-CIL and institutional stands at 11% compared to 14%. Revenue from housing and infra stands at 10% compared to 13%. International revenue stands at 40% compared to 38%, up by 35% year-on-year. Defense revenue was quarterly highest till date at INR 702 crores versus INR 409 crores, up by 72% showing a wonderful pick in the defense business. Coming to the highlights for 9 months, we registered revenue to the tune of INR 6,785 crores versus INR 5,374 crores, which is up by 26%. Highest 9-month EBITDA at INR 1,879 crores versus INR 1,485 crores, which is up by 27%, highest 9 months PAT at INR 1,181 crores versus INR 942 crores up by 5%. Now we would be happy to take any questions, comments or suggestions that you may have. Over to you.

[Operator Instructions] The first question is from the line of Nitin Arora from Axis Mutual Fund.

Sir, just to articulate on your defense piece, going forward. First, your take on your guidance because this quarter has been very strong. So was Pinaka was a part of the execution? And are we still confident enough to achieve our guidance of INR 3,000 crores. And just looking forward because the defense proportion in order book is increasing very significantly, I mean, beyond expectations. How are you thinking about even if you can throw some light on articulation like how FY '27 looks to you? That's my first question. Hello, am I audible? [Technical Difficulty]

Ladies and gentlemen, the lines for the management got disconnected. Please stay connected while we reconnect them.

Hello.

Yes, sir, we can hear you, sir. Should I repeat my question?

Yes, you can repeat again.

Sure. Sir, the question was more from this quarter execution on defense has been very strong, was Pinaka was -- has started now moving. And how do you think about your guidance of INR 3,000 crores this year because Q4 is a very big number you have to achieve? And just going forward, because every quarter you're increasing your defense order book in a very -- you're really exceeding the expectation for investors like us even. How do you think about FY '27 growth on the defense side? That's my first question.

If you look at our Q3 numbers in defense, we have talk, and we were expecting that Pinaka should have been part of these few couple, but trials are pending before we start the new batches of Pinaka in Q3 and we are pretty sure that from Q4 Pinaka will be part of our total [indiscernible] towards defense sector. So once it starts the number will be much, much better. We are expecting that from Q4, it will be quite [indiscernible] moving towards our annual guidance number.

Sorry, sir, your voice was breaking. So you're saying guidance, we are maintaining of INR 3,000 crores? Sorry, your voice was breaking in between.

Like I said that, now Pinaka has started in Q4, the numbers from defense will be much, much better, and we are moving towards our annual guidance.

Got it. Got it. And sir, any color you want to give on FY '27 execution, how qualitatively you are looking the ramp-up on the strong order book?

Like we have said in our previous call that ramping up of defense takes a little more time than the other sectors. And like we have been improving our defense revenue. And as we move forward in next quarter or next year, we will see a gradual improvement on every quarter basis. So in FY '27, we are likely to perform very good. And the total expectations, we will share at the start of the financial year '27.

Sure, sir. Sir, my second question is related to one article in India Today, where the article spoke about you putting up a facility in U.S. regarding drones and the MALE part, as well as you talked about Solar Industry going into making humanoids, involving a lot of scientists from Europe and all. Can you throw some aspect -- I'm just referring to India Today article. Can you throw some aspects, what are we doing here? What's the TAM size because you spoke about this earlier about these MALE and everything, we want to do it. But if you can throw some light on that?

Like we have been sharing that we are working a lot on enhancing our product, especially in loitering ammunition. And then we have started work on the MALE category of drones also and it is going to take some time before we really comment on the total marketed market and what we can get out of that. So we will wait for as far as our futuristic program of humanoid robots and all those are concerned, we are very much interested in taking those initiatives for our country security programs. So once these things fruitify, we will definitely -- can share more details on this.

Thank you. The next question is from the line of Neej Mathukiya from Axia India Asset Management.

Am I audible?

Yes, sir.

Congratulations, sir, on a very strong set of numbers. 2 questions from my side. First is, as per some reports, you will leave shortage of 155 mm shells, and I think in Q4, we are also starting commercial production of 165 mm, so are these -- and after this FDA, are we planning to cater with the demand? Or are we getting any inquiry from that side?

So like I said in the previous quarterly call that we are planning to start manufacturing of 155 mm caliber ammunition. So we're still working on that. And commercial production definitely should start in the Q4.

Okay. And the second question was on UAV. Currently, where do we stand when it comes with the progress of MALE and HALE UAV?

So we are working on these programs. And these programs take longer time to develop. So we will wait for the final outcome, let's assume that in a year's time, once anything concrete happens, we will definitely share with our stakeholders. .

The next question is from the line of Amit Dikshit from Goldman Sachs.

And sir, congratulations on a great set of numbers and confirming of the fourth highest civilian award on the Chairman. 2 questions from my side. The first one is just extrapolating a bit on the shell part. We were already supplying 30 mm shell to Indian Navy. And now Defense Minister has inaugurated the medium caliber shell factory. And you spoke about 155 mm. So just from an industry perspective, how you are seeing the demand shaping up? We have been reading that there is a very firm demand for next 6, 7 years based on replenishment. And Solar is nicely dovetailing itself to this demand. So just wanted to get an industrial perspective from your side, how do you see this demand for exports as well as within the country?

So it definitely was a big achievement on the part of our company to develop these products like 23 mm, 30 mm and for which the operation has been there in the last month. And the demand for these products is quite good, and we have participated in the long-term RFP from Indian Ministry of Defense. And we are expecting orders to come out because we are still participating in the final trials where they will do the technical analysis. And once those round is over, then it will enter into the commercial state. It's going to take some more time. But in this coming year, we should see the orders coming for 23- and 30-mm programs. So definitely, that will help us to ramp up the production. At the moment, we are only manufacturing for naval requirement. And once the army requirement starts, this can become a good portion of our total defense order book or defense revenue.

And sir, some color on export market?

It is difficult for me to give any color on export market. But as and when we receive orders, we will definitely discuss because international market is so huge that it is very difficult to digest the numbers. But like in every country, they have their own players. And once you have to say, if you think that we should be part of those programs, it takes a little bit more time. We are trying to enter into that -- those markets. And once we start getting orders, we will share with all the people.

Great. The second question is essentially on international nondefense business. We have seen revenue picking up sharply. And for the first time, we have achieved INR 1,000-plus crores in revenue. I know you gave these numbers in your annual report every year on the subsidiaries performance. But just wanted to get a little bit of color on how -- which geographies actually contributed to this kind of growth? And whether we have ramped up operations in some of the newly started subsidiaries or what kind of -- you are seeing more exploration essentially in mining business, particularly because of the higher base metal prices that we are seeing. So that is contributing to this growth. So just wanted to get a bit sense on the drivers for this international mining business because this has performed exceedingly well.

Yes. You are very right on the observation that we are doing quite good in international business. And like I have shared in my press note that across the world, we have seen that there is a good demand in demand for commodities like gold, copper and related industrial metals, and those are helping us to increase our international business. In the last 7 to 10 years, we were trying to set up the facilities across the world. And we have seen that business from international market is going up year-on-year, so there were some turbulent years in between while we were setting up those things. But now things are shaping up quite well. I mean this quarter, like I said, we have crossed INR 1,000 crores, which is a growth of almost 35% and we believe that it is all because of our efforts in last so many years. Specifically on your question on which geography. So definitely, demand in African market is quite good. We are getting good traction in some of the Southeast Asian market also, we are doing quite good in Turkey and nearby market also. So by and large, most of our geographies wherever we are present is doing quite well, and we expect the momentum to continue. But by and large, on an annual basis or business as a whole, like we say that sometimes India is very good, international is little low, sometimes international is quite good and India is low. So it's a combination of various factors. So business as a whole, we still believe that growing at 15% should not be a big problem for a company like Solar. I hope I have answered your questions.

The next question is from the line of Bhavin from SBI Mutual Funds.

So at the outset, congratulations for the award to our Chairman. And the question actually for me is to understand if I were to break the defense order book into the domestic and international, if you give us -- can you help us with more color on the international piece of the defense order book? What it is currently, what's the kind of projects that are there in the defense order book on the international side? And what's the gestation of the execution for these projects?

See if you look at our total order book from defense is around INR 18,000 crores. And out of that, around INR 6,500 crores to INR 7,000 crores is from Indian market and balance, which is around, say, INR 11,000 crores is from the international market. As far as gestation time is concerned, we are continuously ramping up our facilities. Products are already well qualified, so we don't see much challenge on converting these orders into the numbers. And you can see that from Q3, we have improved our defense business significantly, although Pinaka is not part of the Q3 numbers. And once Pinaka will also start in Q4, defense will grow up, and these international orders will also keep converting at a larger level. So from Q4 onwards, I think you can see better numbers from India as well as defense markets -- overseas markets.

Sure. So just if I -- just help me understand if I -- my understanding is correct that, a bulk of the international order book is on the HMX side of our business. And out here, the delivery time line, the contractual delivery time lines would vary between 3 to 4 years. Is this understanding correct? .

You asked 2 questions on the product specific for which our company policy is very clear, and you are aware of that. As far as conversion of orders are concern, like I say, whatever orders we have received against each order, we have mentioned the time line. And like I said that we are confident that we can convert these orders into the numbers because our products are very qualified and we have been successfully supplying these products. So ramping up is not a problem.

And over the incremental margins that we have seen over the last couple of years, would you attribute to the change in the mix towards the defense where the underlying investments, which was dragging down the margins is now actually bearing the fruit where the margins that we are seeing currently could be sustained over at least the next 3, 4-year period?

I think because since 2 factors, which were definitely impacting our EBITDA margin in, say, a couple of years back. One was international, and second was defense. Since international has started performing quite well, and we are expanding in more geographies and expanding the capacities in those markets. So definitely up and down will keep going. It's part of business, but defense has been shaping quite well because of all the geopolitical tensions and the vacuum across the world for these products. So we are confident that we should be able to maintain the EBITDA margins around 27%, 28% as we move forward also.

The next question is from the line of Sanjeev from Antique Stockbroking.

First of all, congratulations for -- to the Chairman for being awarded with Padma Shri, much deserved, sir. Sir, my question was on the Pinaka rocket. Is there any seasonality associated with delivery of this rocket, maybe in FY '27 because FY '26 was just a part year, in FY '27 onwards?

No. I think from Q4, we will start supplying Pinaka rockets. And as we move forward, things will be better and better. And the programs are of long tenure, 7 to 10 years. We will see that every year, we will keep supplying the products consistently. And like you might have read that there will be new variants of Pinaka and once those will also become part of our kitty, overall basket of Pinaka series products. So we will see more business from this product.

And sir, on the gross margin expansion we have seen in the stand-alone side, what could be the main drivers?

Main drivers are basically increasing defense business and increasing international business, which is well supported by exporting out of the country. And there are various initiatives which we have taken to improve the efficiencies across the facilities. That is helping us.

And sir, lastly, the nondefense and export business hasn't contributed much in terms of growth in the first 9 months. What outlook you have for the next 2 years? Do you expect a rebound in terms of growth for the other segment?

Yes. If you look at India business, definitely in the first 9 months, the demand was greatly impacted due to heavy monsoon and some slowdown in the economy. And we can correlate these sentiments with the fact that demand from coal and overburden, which is mainly Coal India, Singareni Collieries and private coal mines, there has been practically no growth in this financial year. And if you look at the demand for electricity, which is also quite flat. But these are the dull periods. And in every economy, we can see such kind of period. But we are a firm believer that the demand for these things or the mining products and related products for generating electricity should keep growing at 6% to 7% on annualized basis and they should grow at around 10% to 12% on volume terms and which will help us to grow our business even in India on 15% on annualized basis, it can be up and down on some quarter or a year. But if you look at long-term trajectory, we are quite confident of growing the business around 15%.

The next question is from the line of Alisha Mahawla from Trust Mutual Fund.

The first question is if you could highlight what else is part of a defense pipeline for this year and next year?

Can you repeat the question, please?

I hope, I'm audible?

Yes.

What is our defense pipeline looking like for this year and next year specifically for the domestic market?

Defense pipeline, as of now is around INR 18,000 crores as of now. And we will be definitely doing a lot of sales out of these orders. And we expect more orders to come in as we move forward because we are developing plenty of products for India and international markets. So we expect a lot of orders to keep coming in our kitty. But as of now, it is very difficult to give a firm number on the product pipeline for the next year.

Okay. And the Pinaka execution from Q4, so you said that it is delayed because some trial are pending, so is that complete or there could be some further delays to the execution of Pinaka from Q4 to Q1?

No, I don't see any more delay in this side.

Has the trials been complete?

Like I said, you will see the numbers from Q4 for Pinaka rocket. So let us stick to that.

Okay, sure. And last question is for 155 mm shells. if you could just rehighlight what is the capacity, when is it coming on stream? And what is the kind of ramp up or contribution you're looking from that for FY '26 or '27?

So we have started working on 155 mm shells in last year, and we have started production as well. And we are waiting for the final round of qualification, once we finish with that, then we can share more details on this product. But as a policy, we don't share such kind of details on product-wise, like you have asked for capacity for 155 mm and all that. But more or less, we believe that, we should focus on the overall guidance for defense product assets and the results we are delivering.

The next question is from the line of Balasubramanian from Arihant Capital.

Congratulations for Padma Shri for the Chairman. He was well recognized for his significant contribution specifically in strengthening India indigenous defense manufacturing capabilities, which including development of ammunition and rockets. . Sir, my first question, I think earlier, we have faced entry restrictions and currency availability issues, especially in African markets. And nearly around 40% of our sales is coming from international markets. Just want to understand how much of our business is coming from African markets? And how the situation currently is improving? And how much is our ForEx exposure in those regions?

So as far as the ForEx exposure is concerned it is basically normal expense cost for our business, so it is a routine expense which is incurred because we are operating in multiple currencies in multiple geographies. So this is one which is a very normal cost of the business and approximately it is in the range which we expect. So it's approximately around INR 20-odd crores, which is very, very normal for us.

And we have guided nearly INR 2,500 crores kind of CapEx, as of 9 months how much we have achieved? And what percentage of allocation goes to defense capacity expansion versus the international or new business pipeline?

We can share the total CapEx update on the Q4 numbers, please?

The question is from the line of [ Bharat Shah ] from Shah Family Office.

Manish, hearty, hearty congratulations to you and the entire Solar team. And not only just having very healthy growth rates but improving the quality of the growth even more and more. So that really deserves a huge amount of praise. I have 2 questions. Starting with the first one. On a long-term basis, say, 3 to 5 years, our -- clearly, our defense as well as international business will continue to drive growth rate ahead of our domestic CIL or non CIL or the infra business or at least that's what I assume. If that is the case, what kind of -- I'm aware that you mentioned during discussion just now 15%-plus growth rate. But I would have assumed that given the fact that domestic business you just now mentioned about 18-odd percent growth rate, 11% 12% volume and 18% value. And if defense and international business will continue to deliver, given the healthy order book and opportunity at a much higher rate. Would we say over the next 3 to 5 years, our earlier picture of 20% plus kind of a compounded growth over the 5-year period is a realistic assumption?

Thank you, Bharat bhai. Basically, if you look at my update, I have said that on volume terms, we should grow at 10% to 12% per annum, and that will help us to grow our business, especially in mining side by around 15% per annum. So we believe that this is quite very much possible, grow at around 15% on an annualized basis. And if you look at the defense potential, like I shared that we are getting a lot of orders, and we are participating in many of the long-term defense programs like MPATGM and Kusha program apart from the Pinaka series of products. So potential is quite good and we are getting a lot of orders as well. So if you combine the mining and defense together, definitely growing at 20% plus is not at all difficult for Solar at this stage for next 3 to 5 years down the line.

Okay, perfect. And presumably given the fact that defense is a higher-margin business, so is international and exports. Our margins have a reason to be protected or improved over the period of time?

Like we have demonstrated that since the international business has no much baggage leftover, which will impact the margin improvement or sustaining the margin. As defense keep growing, definitely, margins should keep improving. But as a prudent practice or conservative policy of our company, we try to maintain at a subdued level. And based on those things, I expect that getting 27% on next 3 to 5 years should not be a big problem for us.

Fantastic. The second and last question. We have come a long way over the period of time that I've interacted with you and the firm, 5, 6 years back we had nonexistent defense business, but we were building for it. We had a very small but a difficult international business like you just now described, a lot of baggage and challenges were constantly causing confusion over the period of time. But from there, these 2 businesses have now become 70% of our total turnover, roughly. And among the healthy growth ballparks, we have developed a lot of products. We have earned respect of the products that we are supplying, getting into more complex programs, more geographies, more opportunities, better products technology. So keeping in mind all of these, when you view next 5 years, what are, in your mind, key strategic challenges and key strategic priority for you?

And for us, looking at these kind of opportunities, our key priorities is to focus on the new technologies, which we should be able to adapt and keep on developing the products for our security solutions or providing security solutions for not only for our country, but outside the country as well. So as we are expanding in defense in various zones or areas, it will be a challenge for us to maintain the relationship and strong connect with all our stakeholders. So that is, I believe, is a key priority of challenge as well. And as far as the focus is concerned, like I said that, adopting new technologies, developing new product is our focus.

Fantastic. And once again hearty congratulations, not just getting healthy growth rate, but very superior quality of the growth, your numbers may keep looking as if it is very easy to get these kind of results. But I'm sure there is a remarkable work going on. So congratulations to you and your team for this performance and for the future.

Thank you very much, Bharat.

Thank you. Ladies and gentlemen, we will take that as a last question for today. I now hand the conference over to Ms. Jyoti Gupta for closing comments. Over to you, ma'am.

Heartiest congratulations, sir, on being honored with Padma Shri. This is well deserved recognition truly reflects your visionary leadership, unwavering commitment and significant contribution to India's industrial progress. Wishing you continued success, good health and many more milestones as you continue to inspire future generations and common people like us. Thank you so much. On behalf of Nirmal Bang Institutional Equities, we would like to thank the management of Solar Industries Limited for the call and also many thanks to the participants for joining the call. Thank you very much, sir. Thank you, Aanchal. We will now conclude the call. Thank you.

Thank you. On behalf of Nirmal Bang Equities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.