Defence Stock: Will the 44% Surge in Ammonium Nitrite Prices Affect Solar Industries’ Margins?

Synopsis: Rising raw material costs and firm demand are driving explosives pricing higher, supporting realizations and strengthening the sector outlook, with sustained mining and defence activities ensuring continued growth momentum ahead.

The shares of this large-cap company majorly engaged in manufacturing bulk & cartridge explosives, detonators, detonating cords and components serving across defence,mining, infrastructure and construction industries were in focus after sharp surge in ammonium nitrite prices. 

With the market capitalization of Rs. 1,31,437 Crores,the shares of Solar Industries India Ltd were trading at around Rs. 14,525 per share which is 18.4 percent discount from its 52 weeks high of Rs. 17,820 per share and is trading at a P/E of 90.5 where as industry P/E stands at 24.7

Brokerage view: 

According to Goldman Sachs, Solar Industries India continues to benefit from a strong pricing environment in the explosives segment, driven by rising input costs and robust demand from mining activities. The brokerage has maintained a Buy rating with a target price of  Rs. 18,900, highlighting confidence in sustained pricing tailwinds, improved realizations, and strong earnings visibility going ahead.

Input Costs and Pricing Environment

A sharp 44 percent  increase in ammonium nitrate prices has significantly driven explosives pricing upward. This steep rise reflects strong cost pressures across the value chain, acting as a key catalyst for overall price escalation in the segment. 

Explosive costs for coal-linked players have risen by ~26 percent , indicating a robust pricing environment. This suggests that industry participants are effectively passing on increased input costs, maintaining pricing discipline and strengthening their market position. 

Improved Realizations and Demand Drivers

The increase in input costs is translating into better realizations for explosives companies. Rather than compressing margins, the higher pricing is supporting profitability, highlighting strong demand-supply dynamics and pricing power within the sector. 

Sustained mining activity and rising coal production requirements continue to underpin demand for explosives. These structural drivers ensure long-term consumption visibility, supporting consistent growth across the industry. 

Order Book & Revenue Segmentation 

Solar Industries India maintains a strong order book exceeding Rs. 21,200 crore, reflecting healthy demand visibility. The backlog remains well diversified across key segments such as CIL & SCCL and defence, supporting sustained growth momentum.

For 9MFY26, revenue stood at Rs. 6,785 crore. The international segment was the largest contributor at Rs. 2,809 crore (41 percent  of sales), followed by defence at Rs. 1,626 crore (24 percent ). Non-CIL & institutional contributed Rs. 906 crore (13 percent ), housing & infrastructure Rs. 749 crore (11 percent ), CIL Rs. 655 crore (10 percent ), and others Rs. 40 crore (1 percent ), indicating a well-diversified revenue mix.

Financials: 

Revenue from operations has increased on a yearly basis  from Rs. 1973 Crores to Rs. 2548 Crores, up 29 percent. Operating profit has increased from Rs. 527 Crores to Rs. 708 Crores, up 34 percent and net profit has increased from Rs. 338 Crores to Rs. 467 Crores, up 38 percent 

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