HP Adhesives Limited

Basic Materials — Specialty Chemicals · NSE

₹34.11+₹0.29 (+0.86%)

DalalBaazaar Score

37 / 100

🔴 Weak

Verdict

CAUTION

Risk

Very High

Driven by high debt relative to equity, 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. Debt is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:00 pm

Understanding the Business

Company site ↗

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

What does this company do?

HP Adhesives Limited manufactures and distributes adhesives and sealants in India and internationally.

IndustrySpecialty Chemicals

SectorBasic Materials

Employees705

Annual revenue₹249 Cr

How does it make money?

Turns over ₹249 Cr a year. Of every ₹100 of sales, about ₹3 reaches shareholders as profit, with ₹6 left at the operating level before interest, tax and depreciation. Each of its 705 employees supports ₹35.4 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹35.4 lakh

Who are its competitors?

The closest listed comparisons in its industry are ASIAN PAINTS LIMITED, PIDILITE INDUSTRIES LTD, SRF LTD, UPL LIMITED. 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 4.3% 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 ROE22.3%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +7% while net margin moved -40% 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+7%

Margin effect-40%

DalalBaazaar Score

37/ 100

Weak

Weighted across six categories. Every point is explained below.

✗ ROCE of 4.3% is below 10% — capital is not working hard
✗ ROCE has fallen by 6.8 points — returns are eroding
✗ EBITDA margin of 6.1% is thin — little cushion if costs rise
✗ Net margin of 0.8% is slim
• Revenue has compounded at 2.3% a year, which is the base these returns are earned on

Quality vs. Valuation

Company Quality

38/ 100

Weak

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

Valuation

29/ 100

Expensive

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

Weak on business quality and not cheap enough to compensate.

Historical Valuation

Current P/E

170.6x

3Y Median

36.7x

40 monthly readings · mean 45.4x · range 13.5x–103.6x

Sector Median

40.4x

median of 4 sector peers

⚠️Current valuation is approximately 365% above its 3y median of 36.7x. 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 323% above the peer median of 40.4x.

vs. its own history

Expensive

36.7x median over 40 months · +365%

vs. sector peers

Expensive

40.4x median of 4 peers · +323%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

20.7x

PEG

—

What's Good / What's Bad

🟢 What's Going Well2

Debt is being paid down
Total debt is down 50% over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention2

Return on equity is falling
ROE has dropped from 7.3% to 3.7% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 11.0% to 4.3% — often a sign of competition or overexpansion.

Red Flags

4 items require attention · 1 high · 3 watch

🔴High leverageFinancial
Debt/Equity of 2.25x — earnings must service borrowings before shareholders see anything.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹6 Cr in the latest year.
🟡Profit is decliningFinancial
Net profit is down 36% over 3 years.
🟡Margins are compressingFinancial
EBITDA margin is down 3.2 points over 3 years.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Deleveraging frees up earnings
Debt is down 50% over 3 years. Every rupee of interest not paid drops to the bottom line, so profit can grow even if revenue does not.
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?

Margins are being competed away
EBITDA margin has fallen from 9.3% to 6.1%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
Leverage amplifies any setback
Debt/Equity of 2.25x. Interest is payable whether or not the business has a good year.
The price already assumes success
The stock trades 365% 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.
Growth barely outpaces inflation
Revenue compounding at 2.3% a year is close to the rate prices rise, so the business is gaining little ground in real terms. That leaves the share price dependent on a re-rating rather than on earnings growth.
Returns on shareholder capital are falling
ROE has dropped from 7.3% to 3.7%. Each rupee of equity earns less than it did, so profit growth increasingly depends on raising more capital rather than on the existing base working harder.

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

1EBITDA margin holds above 4%✓ 6.1%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Free cash flow remains positive✗ -₹6 Cr
Profit that never becomes cash eventually stops being profit.
3Revenue growth stays above 4% a year✗ 2.3% CAGR
Latest reported year was -4.1%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
4Debt / EBITDA stays below 2x✓ 0.3x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 8%✗ 4.3%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

2 / 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

1 good · 3 neutral · 7 weak

Market Cap

₹313 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

170.6x

Expensive

Expensive — verify against sector peers

P/B Ratio

1.66x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹0.2

Profitable

Profitable on a per-share basis

ROE

3.7%

Weak

Weak capital efficiency

ROCE

4.3%

Weak

Low return on total capital employed

Debt/Equity

2.25x

High

High leverage

Revenue Growth (YoY)

-4.1%

Shrinking

Sales are contracting

Profit Growth (YoY)

-61.8%

Falling

Profits are shrinking

Dividend Yield

1.17%

Modest

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

Free Cash Flow

-₹6 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

Operating Margin

-2.5%

Weak

Thin margins leave little room for error

Net Margin

0.8%

Weak

Very little revenue reaches the bottom line

Current Ratio

3.58

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.54

Defensive

Steadier than the market

52W Range Position

29%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

34.5 / 35.1

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

41.7

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹233 Cr	₹236 Cr	₹250 Cr	₹249 Cr	+2.3%
EBITDA	₹22 Cr	₹32 Cr	₹28 Cr	₹15 Cr	-11.0%
EBITDA Margin	9.3%	13.7%	11.0%	6.1%	—
PAT (Net Profit)	₹11 Cr	₹21 Cr	₹18 Cr	₹7 Cr	-13.7%
EPS	₹1.18	₹2.24	₹1.99	₹0.76	-13.6%
ROE	7.3%	12.2%	9.9%	3.7%	—
ROCE	11.0%	16.9%	12.9%	4.3%	—
Total Debt	₹9 Cr	₹3 Cr	₹8 Cr	₹4 Cr	-20.8%
Free Cash Flow	-₹21 Cr	₹5 Cr	₹3 Cr	-₹6 Cr	—

🟢 Revenue has grown at 2.3% a year over 3 years.

🔴 EBITDA has shrunk at 11.0% a year over 3 years.

🔴 EBITDA Margin has fallen from 9.3% to 6.1% over 3 years (-3.2 pts).

🔴 PAT (Net Profit) has shrunk at 13.7% a year over 3 years.

🔴 EPS has shrunk at 13.6% a year over 3 years.

🔴 ROE has fallen from 7.3% to 3.7% over 3 years (-3.6 pts).

🔴 ROCE has fallen from 11.0% to 4.3% over 3 years (-6.8 pts).

🟢 Total Debt has shrunk at 20.8% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹232 Cr

Total Liabilities

₹44 Cr

Cash & Equivalents

₹1 Cr

Operating Cash Flow

₹7 Cr

Capex

-₹13 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

71.3%

Corporate Actions

Dividend Rate

₹0.4

Ex-Dividend Date

15 Sept 2026

Peer Comparison

Company	P/E	ROE
ASIAN PAINTS LIMITED	46.9x	22.3%
PIDILITE INDUSTRIES LTD	57.8x	24.4%
SRF LTD	33.8x	15.4%
UPL LIMITED	21.5x	6.1%

Recent News

1 positive3 mixed2 general

HP Adhesives Ltd. Key Financial Ratios – Valuation, Profitability & More

Value Research, 29 Aug

Why Is HP Adhesives Share Price Falling Key Reasons 2026

Univest, 15 JunPrice move

🟡Mixed / dependsA price move rather than a change in the business. If the figures on this page have not moved, the fall is either an opportunity or news they have yet to catch up with.

HP Adhesives FY26 PAT Falls 62%; Fire Loss, ₹0.40 Dividend

scanx.trade, 12 MayCapital return

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

Getting In Cheap On HP Adhesives Limited (NSE:HPAL) Might Be Difficult

Simply Wall Street, 01 Nov

HP Adhesives Share Price Rise: Chemicals Sector Context

Univest, 12 AugPrice 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.

HP Adhesives (NSE: HPAL) Under Pressure as Earnings Miss Raises Investor Concerns

Kalkine India, 13 MayResults

🟡Mixed / dependsA results event. The figures on this page update once the new statements reach the data feed, which usually lags the announcement.

Watch Items

Revenue growth is negative (-4.1%) 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

MiddlingFinancial Health

WeakBusiness Quality · Growth · Profitability · Valuation · Risk

Points for each in the Score ↑

Weak on the fundamentals

Poor scores on business quality without a price low enough to compensate. There is no obvious argument for owning this over a stronger company at a similar valuation. 1 high-severity red flag sits above this conclusion and should be read first.

3 of 5 tripwires tripped — Free cash flow remains positive; Revenue growth stays above 4% a year; ROCE stays above 8% · see Key things to watch ↑