At a Glance:
H.P. Cotton Textile Mills Ltd is a small but consistent cotton yarn and sewing thread exporter based in Hisar, Haryana. Despite a rich history, the company has had a rollercoaster P&L – going from net losses to profit and back. Currently trading at ₹108, the stock boasts a market cap of ₹42.3 Cr, decent ROCE of 19%, and a surprisingly punchy Q4. But is this thread mill finally sewing success, or just spinning yarns?
1. 🧵 WTF Do They Even Do?
HP Cotton makes cotton sewing threads and hosiery yarns — essential stuff for:
- Garment manufacturers
- Export houses
- Hosiery & knitting industry
They proudly ship to 30+ countries, and their mill in Hisar, Haryana runs the show.
Not a fancy biz, but a steady B2B export machine. Think of it as the Zomato delivery guy of the textile industry — always working, rarely noticed.
2. 💰 Financials – Profit Is Finally In Vogue?
| Metric | FY25 | FY24 | FY23 |
|---|---|---|---|
| Sales | ₹128 Cr | ₹94 Cr | ₹84 Cr |
| Net Profit | ₹3 Cr | ₹1 Cr | ₹-18 Cr |
| EBITDA Margin | 10% | 4% | -14% |
| ROCE | 19.2% | 4% | -22% |
| ROE | 17.2% | 2.6% | -46% |
📈 FY25 is a legit turnaround year:
- Revenue up 37%
- OPM hit 10%, best in 5 years
- Net profit zoomed 3x from FY24
But don’t get too excited — this company has a habit of slipping back into losses like your gym routine in February.
3. 🧮 Valuation – Cheap or Just Unloved?
| Metric | Value |
|---|---|
| Price | ₹108 |
| P/E (TTM) | 16.4x |
| Book Value | ₹41.5 |
| P/B | 2.6x |
| ROE | 17.2% |
⚖️ Let’s estimate a Fair Value:
Assume:
- Sustainable EPS ~ ₹6.5 (FY25 EPS)
- P/E range for small textile exporters: 10x – 15x
EduFair Value Range: ₹65 – ₹98
(Current price ₹108 = slightly overvalued to fairly priced)
4. 🔥 What’s Cooking? News, Drama, Triggers
- 🧾 Auditor is happy – Unmodified audit opinion
- 📦 Order book growing, exports strong
- 🚨 Show Cause Notice on export obligation in June 2025 — company denies liability
- 🧶 Capacity utilization improved, suggesting stronger Q1FY26 too
📢 But no major capex or debt rejig announcements = No masala.
5. 💣 Balance Sheet – Borrowed, But Balanced
| Metric | FY25 |
|---|---|
| Equity | ₹4 Cr |
| Reserves | ₹12 Cr |
| Debt | ₹40 Cr |
| Total Liabilities | ₹93 Cr |
| Fixed Assets | ₹36 Cr |
📌 Leverage exists, but manageable
📌 Net worth is ₹16 Cr, which is small — but they’re sweating it hard
Interest cost of ₹7 Cr is manageable when profits are rising, but risky if demand drops.
6. 🔁 Cash Flow – Sab Number Game Hai
| FY25 |
|---|
| Cash from Ops |
| Cash from Investing |
| Cash from Financing |
| Net Cash Flow |
They’re using internal accruals to reduce debt — good move. But nothing sexy here.
7. 🧵 Ratios – Stitching Up Improvements?
| Ratio | FY25 |
|---|---|
| ROCE | 19.2% ✅ |
| ROE | 17.2% ✅ |
| OPM | 10% ✅ |
| CCC | 73 Days |
| Interest Coverage | ~1.4x ❌ |
📍 ROCE/ROE combo looks healthy
📍 Interest coverage still low = fragile if margins dip
📍 Working capital cycle improving
8. 📊 P&L Breakdown – Finally Stable?
From ₹128 Cr revenue:
- EBITDA = ₹12.8 Cr
- Interest = ₹7 Cr
- Depreciation = ₹3 Cr
- PBT = ₹4 Cr
- PAT = ₹3 Cr
💡 So, after working ₹128 Cr top line, they net ₹3 Cr bottom line. Respectable for a ₹42 Cr company — if they sustain it.
9. 🧵 Peer Comparison – How Does It Stack Up?
| Company | P/E | ROE | OPM |
|---|---|---|---|
| KPR Mill | 49x | 17% | 19.5% |
| Indo Count | 23x | 11% | 12.8% |
| HP Cotton | 16x | 17% | 10% |
| Trident | 42x | 8% | 13% |
🎯 HP Cotton is undervalued vs larger peers like Trident and KPR Mill — but they also have scale, better brands, and balance sheets.
10. 📈 Shareholding – Promoters Are Locked In
| Stakeholder | % Holding |
|---|---|
| Promoters | 64.9% ✅ |
| Public | 35.1% |
| Institutions | 0% ❌ |
- Shareholding has been stable
- No pledge or dilution risk
- Retail ownership is wide (~2,900 investors)
11. 📎 Miscellaneous – Any Red Flags?
- 🟥 No dividend despite profits — reinvesting?
- 🟥 Past was volatile (losses in FY23, poor growth pre-FY25)
- 🟩 Export dependence is high but diversified across 30+ countries
- 🟩 Multiple CRISIL rating updates = company trying to maintain credibility
12. 🧠 EduInvesting Verdict™
HP Cotton is like that kid who failed a few times, but now scoring consistent 70s. Not a topper, not a dropout — just back on track.
🔹 FY25 profit is real
🔹 Margins are up
🔹 ROE is strong
🔹 But one bad export season, and this thread unravels again
If they sustain ₹120–₹130 Cr revenue with 8–10% margins, this ₹42 Cr company deserves a ₹60–₹98 valuation range.
🟨 Fair Value Range: ₹65 – ₹98
🟦 Current Price: ₹108 (Fair to slightly stretched)
✍️ Written by Prashant | 📅 July 3, 2025
Tags: HP Cotton, Textile Exporter, Smallcap Threads, Hisar Companies, Sewing Thread Stocks, EduInvesting, B2B Manufacturing, Turnaround Stocks
