Europe is looking to reduce its reliance on U.S. and Chinese suppliers. To strengthen its capabilities, the European Union (EU) plans to increase defence spending from 1.9% of Gross Domestic Product to about 3.5%. To this end, the Europe ReARM Plan is a strategic defence initiative of the EU designed to rapidly strengthen the region’s military power and make Europe self-reliant in security matters.
The Strategic Shift: EU’s €800 Billion Defence
The plan aims to address capability gaps in munitions and missiles, air defence, drones, and other defence technologies. Overall, the program aims to increase defence spending by an additional €800 billion by 2030. But how does India fit into this? The recently concluded India-EU Free Trade Agreement also includes a security and defence agreement that is directly related to defence cooperation.
India also signed a first-of-its-kind security and defence partnership, establishing a framework for strategic defence cooperation between India and the EU. This creates opportunities for Indian defence companies in areas such as missiles, electronics, radars, submarines, naval platforms, and aircraft engines. In particular, the EU faces acute shortages of artillery shells, small-arms ammunition, explosives, and defence electronics.
This article examines three such stocks that are expected to benefit from this.
#1 Solar Industries: The NATO-Standard Munitions Powerhouse
Solar Industries is one of the largest domestic manufacturers of bulk and cartridge explosives, detonators, detonating cord, and components. The company commands approximately 24% of the explosives market. Its Nagpur plant is the world’s largest single-location cartridge plant. Its presence in Türkiye, a key NATO ally, has opened up the European market for the company.
The 155mm Shell Crisis
155mm artillery shells are a major product line for the company, addressing a critical global shortage. The company is awaiting the final qualification round and anticipates commercial production of 155mm shells to commence in Q4FY26. Notably, 155mm ammunition is the standard caliber for NATO field artillery.
Management said demand is rising due to a global shortage of 155mm shells and that they expect the product to improve their defence numbers once commercial production begins. While 155mm shells were not a commercial contributor in Q3, they are expected to drive growth starting in Q4 FY26, alongside Pinaka rockets.
In addition, Solar has made significant progress in developing smaller-caliber shells for rapid-fire cannons. It supplies 30mm shells for naval requirements. The company recently inaugurated facilities for 23mm and 30mm ammunition.
They have participated in a long-term Request for Proposal for the Indian Army. These products are currently undergoing technical analysis and trials. Management expects orders for the Army requirements to materialize in the coming year.
The Pinaka Program: A 10-Year Revenue Moat
The Pinaka Rocket is a major defence product line for Solar Industries, comprising a series of rocket ammunition systems. Management characterizes the Pinaka project not as a one-time order but as a long-term program expected to last 7-10 years. Thus, the project is expected to deliver consistent annual business over the next decade.
In parallel, the company is actively adding new variants of the Pinaka rocket to its portfolio. This will further expand the business volume as they are qualified and inducted. The supply of Pinaka rockets is confirmed to commence in Q4FY26.
The commencement of Pinaka supplies is the primary reason Solar Industries is confident it will achieve its FY26 defence revenue guidance of ₹3,000 crore. Management stated that once Pinaka starts moving in Q4, the defence numbers will be much, much better.
International Pivot: From Domestic Player to Export Powerhouse
Beyond India, the international segment has become a dominant revenue driver, outpacing domestic growth in several verticals.
In Q3FY26, international revenue grew 35% year-on-year to ₹1,020 crore, crossing the ₹1,000 crore mark in a single quarter for the first time. Exports now account for 40% of the company’s total sales, up from 38% last year.
A significant portion of the defence order book comprises export orders. Of the total defence order book of ₹18,000 crore, approximately ₹11,000 crore is allocated to international markets. According to the company, this surge is due to geopolitical tensions and a global shortage of munitions.
#2 Premier Explosives: The Strategic Monopoly in Missile Propulsion
Premier Explosives manufactures Industrial explosives and detonators for mining, infrastructure, defence, and the space sector. It also contributes to India’s missile programme, including Akash, Agni, BrahMos, and Astra. In addition, it played a pioneering role in manufacturing propellants for missile programmes.
Monopolistic Positioning in Missile Propulsion and Countermeasures
The company manufactures rocket motors with diameters ranging from 40 mm to 2,000 mm. They are a key exporter of fully assembled rocket motors. They produce Pyrogen Igniters and Gas Generators. Premier is the only qualified Indian company to manufacture countermeasures (Chaffs and Flares).
These are used by aircraft to evade enemy radar and heat-seeking missiles. Management notes that these products have a flight life and are also used in training (war wastage), thereby ensuring consistent replacement demand. It is currently expanding its capacity for RDX and HMX to meet export demand.
The NATO Connection and European Market Penetration
The company exports to NATO member countries, specifically Greece and Turkey. During the Q2FY26 earnings call, management confirmed that it is receiving inquiries from around the world, including Central and Western Europe. The company also affirmed its presence in the region. Exports currently account for approximately 35-40% of the company’s total revenue.
Premier is a major exporter of fully assembled rocket motors, RDX, HMX, and their compounds. Management stated that global demand for these materials remains strong and that inquiries have not decreased.
Vision 2030: Expanding the RDX/HMX Value Chain
The company has outlined a long-term Vision 2030 strategy focused on moving up the value chain. In line with this, the expansion of the RDX/HMX plant is on schedule to start production by the end of the current financial year. It has also formed a joint venture with NIBE to manufacture fully integrated rockets, which are expected to enter production in 1.5-2 years.
Premier is actively expanding its portfolio under the Atmanirbhar Bharat (self-reliance) initiative. The company is working with over 15 companies to supply warheads, high-explosive payloads, and initiating chains (fuses/detonators) for drones and loitering munitions.
Premier Explosives Share Price
#3 Dynamatic Technologies: The Tier-1 Anchor for Global Aerospace Giants
Dynamatic Technologies manufactures highly engineered and critical products for the aerospace and defence, metallurgy, and hydraulic sectors. It is also a leader in high-precision airframe structures and aerospace components. Aerospace is the largest revenue driver, accounting for nearly 50% of total revenue in Q3 FY26.
A Tier-1 Partner for Boeing and Airbus
The company supplies these to global aerospace companies, including Airbus, Boeing, Bell Helicopters, Dassault Aviation, Deutsche Aircraft, and Hindustan Aeronautics (HAL). The company has recently been selected as the exclusive partner for the L&T–Bharat Electronics Consortium’s 5th-generation fighter aircraft project.
Dynamatic manufactures high-precision metallurgical iron castings for performance-critical components, including turbochargers and exhaust manifolds. Metallurgical clients include Audi, BMW, Volkswagen, and Daimler.
Restructuring the European Metallurgy Segment
Revenue from Europe is primarily derived from its Metallurgy segment (based in Germany) and the UK operations of its Hydraulics and Aerospace segments. The metallurgy segment accounted for 20% of total revenue in Q3FY26. But the segment faces headwinds in the European automotive market.
Therefore, the company is increasingly shifting its capabilities toward aerospace and defence applications. This strategy includes continuous prototype development for Western European defence customers to improve margins and reduce concentration risk. The European manufacturing base and partnerships with global companies further enhance its positioning.
Manufacturing the Fuselage of Tomorrow
In line with this, the company has inaugurated a Rear Fuselage Assembly Line for the D328eco turboprop aircraft in Bengaluru, in partnership with Deutsche Aircraft. This positions Dynamatic to capitalize on India’s burgeoning regional aviation sector. It has partnered with Airbus to manufacture all types of doors for the A220 regional jet at its facilities in India.
Valuation Perspective: Growth vs. Price
Solar Industries commands one of the leading Return on Capital Employed (ROCE) and Return on Equity (ROE), followed by Premier Explosives. Dynamatic returns ratios are below average due to uneven profitability. In terms of valuation, Solar and Dynamatic are trading at premiums to both the historical and industry median, whereas Premier is trading at a discount to its median multiple.
| Peer Comparison (X) | |||||
| Company | P/E | 5Y Median P/E | Industry Median P/E | ROCE (%) | ROE (%) |
| Solar | 82.4 | 68.9 | 23.2 | 38.1 | 32.6 |
| Premier | 53.1 | 81.8 | 23.2 | 16.9 | 12.2 |
| Dynamatic | 139 | 81.4 | 28.4 | 8.9 | 6.2 |
| source: screener.in | |||||
Europe’s €800 billion ReARM push creates a structural export opportunity for Indian defence manufacturers already integrated into global supply chains.
Solar Industries and Premier Explosives are positioned to benefit from rising demand for ammunition and propellants, while Dynamatic offers leverage in the aerospace sector. However, valuations for Solar and Dynamatic already reflect optimism, making execution and export order conversion the key monitorables going forward. Meanwhile, you can add these stocks to your watchlist and track how their stock prices move in the time to come.
Disclaimer:
Note: Throughout this article, we have relied on data from http://www.Screener.in and the company’s investor presentation. Only in cases where the data was unavailable have we used an alternative, widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.
About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
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