ICICI Securities has placed a bullish call on Premier Explosives (PEL), initiating coverage with a BUY rating and a target price of INR 815, representing a potential upside of 42% from the current market price of INR 574. The brokerage expects PEL to benefit substantially from India’s increasing defence spending and robust demand for indigenous energetic materials.
A Pioneer in Explosives and Defence Materials
Premier Explosives, headquartered in Hyderabad, is among the few Indian companies with end-to-end capabilities in high-energy materials. The company manufactures bulk and packaged explosives, initiating systems, and defence-grade products such as missile propellants, rocket motors, warheads, flares, and grenades. With six manufacturing facilities spread across Madhya Pradesh, Maharashtra, and Telangana, the company also supports India’s space and defence programs.
Premier Explosives Q2 FY26: Financial Performance
Premier Explosives reported revenue of INR 75.6 crore in Q2 FY26, a decline of 20.1% year-on-year (YoY) and 46.8% quarter-on-quarter (QoQ), primarily due to weak execution. The EBITDA margin contracted to 8.6%, down from 17.6% in Q2 FY25, leading to a 61% YoY fall in EBITDA to INR 6.5 crore. However, PAT surged 111.2% YoY to INR 17.8 crore, driven by a substantial increase in other income.
For the first half of FY26, revenue rose 22.7% YoY to INR 217.7 crore, with PAT doubling to INR 33.2 crore, highlighting improving operational leverage despite quarterly volatility.
Order Book Strengthens Growth Visibility
As of 30 September 2025, PEL’s order book stood at INR 1,297 crore, with a staggering 90% contribution from defence contracts. Management guidance indicates FY26 revenue in the range of INR 500–600 crore, implying a 35%+ YoY growth in the second half. Order inflows have already surpassed INR 1,200 crore year-to-date, exceeding the combined total of FY20–FY23. With a two-year execution cycle, revenue visibility remains robust.
Capex Momentum: Expanding Defence Footprint
To capitalise on surging defence opportunities, PEL has embarked on a multi-phase expansion strategy:
- A greenfield facility in Odisha involving a planned outlay of INR 800 crore over 10 years, focusing on ammunition, warheads, and HTPB production.
- An MoU with the Government of Andhra Pradesh for a defence and aerospace manufacturing unit worth INR 500 crore.
- Ongoing expansion in Telangana for RDX and HMX capacity enhancement, with INR 50 crore capex planned for FY26.
Funding for these projects will be supported by a proposed INR 300 crore equity raise through Qualified Institutional Placement (QIP) or preferential issue, of which approximately INR 200 crore will be earmarked for capital expenditure and debt repayment.
Premier Explosives: Financial Outlook
ICICI Securities projects a revenue CAGR of 27%, EBITDA CAGR of 40%, and PAT CAGR of 54% over FY25–FY28, supported by margin expansion from higher-value defence contracts.
| Key Financials | FY25 | FY26E | FY27E | FY28E |
| Revenue | 417.5 | 569.1 | 694.3 | 847.0 |
| EBITDA Margin (%) | 13.9 | 16.4 | 18.1 | 18.9 |
| PAT | 28.7 | 69.2 | 85.9 | 104.5 |
| RoE (%) | 11.7 | 22.4 | 22.2 | 21.7 |
| P/E (x) | 111.9 | 46.5 | 37.4 | 30.8 |
The brokerage expects return on capital employed (RoCE) to climb to ~23% over the forecast period, supported by operational efficiencies and product mix improvement.
Premier Explosives Target Price: Valuation and Recommendation
ICICI Securities values PEL at 42x FY28E earnings, arriving at a Premier Explosives target price of INR 815, and maintains a BUY rating. The firm highlights that PEL’s integrated defence manufacturing capabilities and upcoming capacity additions place it among India’s most promising private defence suppliers.
Key Risks
- Dependence on government contracts could expose the company to policy delays.
- Limited customer concentration in the defence segment heightens execution risk.
- Availability and pricing of key raw materials may affect margins.
Outlook
With India’s defence procurement pipeline expanding rapidly and PEL strategically positioned across high-margin energetic materials, the company stands at the cusp of transformational growth. Despite near-term execution challenges, ICICI Securities sees sustained demand visibility, operating leverage gains, and margin recovery driving strong earnings momentum through FY28.
“Premier Explosives is well-positioned to benefit from the defence manufacturing upcycle and a rising share of indigenised production,” said ICICI Securities analysts Vijay Goel and Kush Bhandari.
Verdict: BUY | Target INR 815 | Upside: ~42% | Time Horizon: 12 months
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