Hindustan Composites Limited

Consumer Cyclical — Auto Parts · NSE

₹445.00−₹33.20 (−6.94%)

DalalBaazaar Score

52 / 100

🟡 Moderate

Verdict

CAUTION

Risk

Moderate

Driven by negative free cash flow, micro-cap size, which brings thin liquidity.

In simple words: The business is earning a fairly low return on the money invested in it, but sales are shrinking. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:48 pm

Understanding the Business

Company site ↗

The 60-second version of Hindustan Composites Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Hindustan Composites Limited develops, manufactures, and markets fibre-based friction materials in India. It operates through Composite Products, Investment, and Trading in Metals and Commodity segments.

IndustryAuto Parts

SectorConsumer Cyclical

Employees528

Annual revenue₹374 Cr

How does it make money?

Turns over ₹374 Cr a year. Of every ₹100 of sales, about ₹8 reaches shareholders as profit, with ₹15 left at the operating level before interest, tax and depreciation. Each of its 528 employees supports ₹70.9 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹70.9 lakh

Who are its competitors?

The closest listed comparisons in its industry are BOSCH LIMITED, MARUTI SUZUKI INDIA LTD., TVS MOTOR COMPANY LTD, EICHER MOTORS LTD. These are the companies its valuation and returns are measured against elsewhere in this report.

Compared side by side in Peers ↓

What is its competitive advantage?Little sign of one

Returns on capital of 3.4% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

Peer median ROE23.0%

What has been driving growth?

Growth has come mainly from selling more, rather than from keeping more of each sale. Over 3 years revenue moved +33% while net margin moved -15% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+33%

Margin effect-15%

DalalBaazaar Score

52/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ ROE of 2.7% is weak

Quality vs. Valuation

Company Quality

51/ 100

Average

How good the business is, ignoring the share price entirely.

Valuation

53/ 100

Fair

What you are being asked to pay, ignoring how good the business is.

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

Historical Valuation

Current P/E

25.7x

3Y Median

20.6x

40 monthly readings · mean 20.9x · range 14.7x–32.4x

Sector Median

45.7x

median of 4 sector peers

⚠️Current valuation is approximately 24% above its 3y median of 20.6x. Paying more than usual needs a reason — faster growth, a better balance sheet, or a re-rating you believe in.

🟢Against its sector it trades 44% below the peer median of 45.7x.

vs. its own history

Expensive

20.6x median over 40 months · +24%

vs. sector peers

Cheap

45.7x median of 4 peers · -44%

vs. generic bands

Fair

15x–35x

EV/EBITDA

11.8x

PEG

6.07

What's Good / What's Bad

🟢 What's Going Well2

Very low debt
Debt/Equity of 0.15x leaves the balance sheet with plenty of headroom.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention0

Nothing stands out as clearly deteriorating on the years of data available.

Red Flags

3 items require attention · 1 high · 2 watch

🔴Debt has risen sharplyFinancial
Total debt is up 67% over 3 years, from ₹1 Cr to ₹2 Cr.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹1 Cr in the latest year.
🟡Receivables growing faster than salesFinancial
Receivables up 61% against revenue up 33% — sales are being booked faster than they are collected.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Cheaper than its peers
It trades 44% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

Sales are being booked faster than collected
Receivables are up 61% against revenue up 33%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
The price already assumes success
The stock trades 24% above its own median multiple. At this level the business has to deliver just to stand still, and a stumble is repriced twice — lower earnings on a lower multiple.
Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1EBITDA margin holds above 13%✓ 14.9%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Free cash flow remains positive✗ -₹1 Cr
Profit that never becomes cash eventually stops being profit.
3Revenue growth stays above 7% a year✓ 9.9% CAGR
Latest reported year was -77.0%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
4Debt / EBITDA stays below 2x✓ 0.0x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 8%✗ 3.4%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

6 / 11 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✗ Revenue growing year-over-year
✓ Profit growing year-over-year
✓ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✓ Short-term technical trend isn't bearish

Price history

Quick Metrics

4 good · 3 neutral · 4 weak

Market Cap

₹657 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

25.7x

Fair

Fairly valued against the generic band

P/B Ratio

0.57x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹17.33

Profitable

Profitable on a per-share basis

ROE

2.7%

Weak

Weak capital efficiency

ROCE

3.4%

Weak

Low return on total capital employed

Debt/Equity

0.15x

Low

Conservative leverage

Revenue Growth (YoY)

-77.0%

Shrinking

Sales are contracting

Profit Growth (YoY)

16.4%

Healthy

Profits growing at a healthy clip

Dividend Yield

0.45%

Modest

Small cash return — most of the return has to come from the price

Free Cash Flow

-₹1 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

Operating Margin

7.9%

Average

Average margins

Net Margin

8.5%

Average

Average bottom-line conversion

Current Ratio

2.24

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.38

Defensive

Steadier than the market

52W Range Position

48%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

406.2 / 404.2

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

69.1

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹282 Cr	₹297 Cr	₹324 Cr	₹374 Cr	+9.9%
EBITDA	₹42 Cr	₹53 Cr	₹59 Cr	₹56 Cr	+10.1%
EBITDA Margin	14.8%	17.8%	18.1%	14.9%	—
PAT (Net Profit)	₹27 Cr	₹34 Cr	₹35 Cr	₹31 Cr	+4.2%
EPS	₹18.6	₹23.3	₹23.7	₹21.06	+4.2%
ROE	3.0%	3.5%	3.2%	2.7%	—
ROCE	3.4%	4.1%	3.9%	3.4%	—
Total Debt	₹1 Cr	₹0 Cr	₹0 Cr	₹2 Cr	+18.7%
Free Cash Flow	₹9 Cr	₹4 Cr	₹9 Cr	-₹1 Cr	—

🟢 Revenue has grown at 9.9% a year over 3 years.

🟢 EBITDA has grown at 10.1% a year over 3 years.

🟡 EBITDA Margin has held roughly flat at 14.9% over 3 years.

🟢 PAT (Net Profit) has grown at 4.2% a year over 3 years.

🟢 EPS has grown at 4.2% a year over 3 years.

🟡 ROE has held roughly flat at 2.7% over 3 years.

🟡 ROCE has held roughly flat at 3.4% over 3 years.

🔴 Total Debt has grown at 18.7% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹9 Cr to -₹1 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹1,264 Cr

Total Liabilities

₹119 Cr

Cash & Equivalents

₹2 Cr

Operating Cash Flow

₹21 Cr

Capex

-₹22 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

81.7%

Corporate Actions

Dividend Rate

₹2

Ex-Dividend Date

16 Oct 2026

Peer Comparison

Company	P/E	ROE
BOSCH LIMITED	56.9x	15.9%
MARUTI SUZUKI INDIA LTD.	25.2x	13.4%
TVS MOTOR COMPANY LTD	56.8x	35.8%
EICHER MOTORS LTD	34.7x	23.0%

Recent News

3 positive2 mixed1 general

Hindustan Composites Share Price and Valuation Snapshot

Univest, 16 Oct

Dividend, stock split record date: Last chance to buy today - Hindustan Composites, Canara Robeco, HCL and Bansal Wire

Livemint, 14 OctCapital return

🟢Potentially positiveCash or shares returned to holders. A buyback is only good value if the shares were cheap when bought.

Hindustan Composites Declares Special Interim Dividend Of ₹21 Per Share

Sahi, 13 OctCapital return

🟢Potentially positiveCash or shares returned to holders. A buyback is only good value if the shares were cheap when bought.

Hindustan Composites declares ₹21 special interim dividend for FY27

scanx.trade, 12 OctCapital return

🟢Potentially positiveCash or shares returned to holders. A buyback is only good value if the shares were cheap when bought.

Rane (Madras) to acquire Hindustan Composites’ friction business for ₹370 crore

CNBC TV18, 30 JunM&A

🟡Mixed / dependsAcquisitions change the balance sheet before they change the earnings. Look at what was paid, how it was funded, and whether debt rose.

Hindustan Composites Share Price gains as metrics stay low

Univest, 05 OctPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Watch Items

Revenue growth is negative (-77.0%) on the latest reported period — check if this is one-off or a trend.
Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

StrongFinancial Health

MiddlingBusiness Quality · Valuation · Risk

WeakGrowth · Profitability

Points for each in the Score ↑

Unremarkable in both directions

A reasonable business at a reasonable price. Nothing here is alarming and nothing is compelling, which usually means the decision rests on things this data cannot see — the industry's direction, management's intent, and what else is available to you. 1 high-severity red flag sits above this conclusion and should be read first.

2 of 5 tripwires tripped — Free cash flow remains positive; ROCE stays above 8% · see Key things to watch ↑