Solar Industries' defence share may fall to 22-25% by FY30 after Omnia deal
Jefferies projects that Solar Industries' defence segment revenue contribution will decline to 22-25% by FY30 following the Omnia acquisition, as agriculture and explosives segments expand their share of revenues. Despite near-term EPS dilution and elevated leverage, the brokerage maintained its Buy rating, citing expectations for earnings growth exceeding 30% and return on equity above 25%.
Solar Industries' strategic Omnia acquisition is expected to reshape the company's revenue composition, according to analyst assessments. The defence segment, which currently forms a significant portion of the company's earnings, is anticipated to contract to 22-25% of total revenue by fiscal year 2030, the analysis indicated. This shift reflects the growing contribution from agriculture and explosives divisions following the deal integration. Jefferies acknowledged near-term financial headwinds, including expected EPS dilution and higher leverage on the company's balance sheet, consequences typical of acquisition-driven expansion. However, the brokerage retained confidence in Solar Industries' long-term trajectory and maintained its Buy rating on the stock. The bullish stance reflects expectations for robust earnings growth exceeding 30% over the forecast period, alongside return on equity metrics anticipated to exceed 25%, suggesting strong capital efficiency post-integration. The acquisition represents a diversification strategy that, while pressuring near-term metrics, positions the company for broader-based growth across multiple industrial segments. Investors are being signalled that despite the acknowledged short-term challenges, the structural benefits of portfolio diversification and earnings expansion justify maintaining an accumulation stance. The defence sector exposure reduction also potentially lowers concentration risk, a benefit in the context of cyclical defence budgeting patterns.
Source: Markets-Economic Times
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