Solar Industries share price falls 4% in two days; is it an opportunity to buy this multibagger defence stock?

Nagpur-based Solar Industries Sees 4% Dip in Two Days—Should Investors Turn Cautious or Take a Strategic Entry?

Shares of Solar Industries India Ltd. have declined nearly 4% over the past two trading sessions, raising questions among investors about the near-term outlook of this multibagger stock. A key player in the defence and explosives sector, Solar Industries has witnessed a stellar rally over the past few years, supported by strong fundamentals, robust order books, and government policy tailwinds. But after this brief correction, is the stock headed lower or is this a tactical buying opportunity?

Recent Price Movement

On July 1st and 2nd, the stock fell cumulatively by around 4%, underperforming the broader market indices. On the NSE, Solar Industries closed at ₹7,055 on July 2, down from ₹7,345 two sessions ago. Despite the pullback, the stock remains up nearly 70% over the past 12 months and over 300% in the last five years—making it one of the top-performing defence-themed stocks on Indian exchanges.

The short-term correction appears largely driven by profit booking and sector rotation, as investors shift allocations towards beaten-down IT and FMCG counters following the broader market's choppy June performance.

Business Fundamentals Remain Intact

Founded in 1995, Solar Industries is India’s largest manufacturer of industrial and defence explosives. The company caters to sectors such as mining, infrastructure, and defence, with a growing international presence in over 65 countries. The defence vertical, which includes products like propellants and warheads, has been a key growth driver in recent quarters.

The company reported a strong FY24 performance with consolidated revenue of ₹6,030 crore (up 21% YoY) and net profit of ₹864 crore (up 25% YoY), largely driven by higher defence orders and international mining demand. The EBITDA margin stood at an impressive 24%, underlining strong operational efficiencies.

Analysts’ Take

Market experts suggest that the recent dip is more of a healthy correction than a signal of fundamental weakness.

Rohit Nair, Senior Research Analyst at Motilal Oswal, notes:

“Solar Industries has a diversified revenue stream, rising defence exports, and long-term visibility due to Make in India initiatives. A 4–5% dip after a steep rally is not unexpected. Long-term investors can consider using this as a staggered entry point.”

Sonal Jain, Defence Sector Analyst at JM Financial, adds:

“The company has a robust order book of ₹4,500 crore, with rising traction in rocket systems and loitering munitions. FY25 and FY26 could see margin expansions due to increased value-add in defence exports.”

Technical View

Technically, the stock is still in an overall uptrend despite the recent dip. The 50-day EMA (Exponential Moving Average) is around ₹6,800, which acts as strong support. If the stock manages to stay above this level, the medium-term bullish structure remains intact.

Siddharth Lohia, Technical Analyst at Angel One, said:

“This is a classic consolidation after a breakout. If it holds ₹6,800–6,850 levels, we could see a fresh leg towards ₹7,600–7,800 over the next quarter. Short-term investors should keep a stop-loss near ₹6,700.”

Tailwinds for the Sector

The Indian government’s continued focus on indigenization of defence manufacturing and increased allocation in the Union Budget for capital defence expenditure is expected to benefit companies like Solar Industries. Furthermore, the global geopolitical environment has increased demand for arms and ammunition, boosting exports.

Recent developments include:

• A ₹500 crore defence export order secured in Q4 FY24.

• Plans to expand its Nagpur facility to accommodate the production of advanced ammunition and propellants.

• Discussions underway for strategic collaboration with global defence OEMs.

Valuation and Investor Outlook

At a trailing 12-month PE of around 72x, Solar Industries isn’t cheap. However, analysts argue that premium valuations are justified given its high growth trajectory, strong moat in defence manufacturing, and the scarcity of comparable peers in the listed space.

Kunal Bothra, Independent Market Expert, said:

“High valuation is always a concern in volatile markets. But Solar Industries is in a niche segment with significant competitive advantage. A long-term investor with a 2–3 year view can consider entering in tranches.”

Some brokerages remain bullish:

• ICICI Securities has a target price of ₹8,200, implying a potential upside of over 15%.

• HDFC Securities maintains a “Buy” call, citing order visibility, R&D focus, and sector tailwinds.

The 4% decline in Solar Industries’ share price over two days is seen more as a breather than a breakdown. With structural tailwinds, strong financials, and a growing global footprint, many analysts continue to recommend the stock for long-term portfolios.

However, given the elevated valuations, investors are advised to avoid lump-sum entries. Instead, a phased or SIP-style investment approach may be more prudent. Those with existing holdings are advised to stay invested, while new investors can consider accumulating gradually near key support levels.