Solar Industries

Solar Industries reported a topline of Rs. 547.48 cr in Q4 FY20 against Rs. 672.95 cr reported in the same period last year, down 18.64% Y-o-Y basis on account of lower defence sales and lower realisations during the quarter. The company reported EBITDA of Rs. 89.71 cr during the quarter with EBITDA margins decreasing 475 bps Y-o-Y basis to 16.39% in Q4 FY20. EBITDA margins were down due to falling commodity prices and higher overhead cost. PAT was at Rs. 53.18 cr with PAT margins of 9.71% for the quarter ended March, 2020. The company also reduced their dividend per share to Rs. 6 per share in view on conserving cash during the pandemic.

Solar Industries continues to face sluggishness in the current financial year with green shoots in Defence and Overseas segment visible Q2 onwards. Even though the management has guided for a flattish growth, EBITDA margins and PAT would materially improve in FY21. The company trades at a rich valuation of 31.12x FY20 earnings of Rs. 278 cr. Even though the fundamentals of the business remain strong, we opine investors to Sell on account of premium valuations and corporate governance issue.