1. At a Glance
Once a clutch and brake components manufacturer, now moonlighting as a treasury house. Hindustan Composites Ltd is a strange blend of dusty auto parts and shiny market securities. Curious combo, but the numbers are doing more than just holding together.
2. Introduction with Hook
Imagine being a brake pad manufacturer who brakes more often on Dalal Street than on highways. That’s Hindustan Composites Ltd (HCL) for you—a company whose friction materials might slow down vehicles, but its treasury operations are racing full throttle.
- Revenue CAGR (5Y): ~13%
- Profit CAGR (5Y): ~30%
- P/BV: Dirt-cheap at 0.67x
Brake pads are boring? Not this one.
3. Business Model (WTF Do They Even Do?)
HCL operates in two modes:
- Friction Materials – Brake linings, clutch facings, disc pads, roll linings, brake blocks—if it stops, they probably make a part of it. Clients are from railways, defense, and commercial vehicles.
- Treasury Operations – Nearly 80% of the balance sheet is tied up in mutual funds, equities, and debt instruments. Yes, they’re also a low-key mutual fund with manufacturing as a side hustle.
ISO 9001 and IATF 16949 certified. Niche, but essential.
4. Financials Overview
Revenue in FY25 crossed ₹325 Cr with an 18% OPM. Net profit stood at ₹35 Cr. EPS was ₹23.7.
| Year | Sales (₹ Cr) | EBITDA Margin | Net Profit (₹ Cr) | ROCE | ROE |
|---|---|---|---|---|---|
| FY21 | 185 | 16% | 21 | 3% | 2% |
| FY22 | 233 | 16% | 22 | 3% | 2% |
| FY23 | 283 | 16% | 27 | 4% | 3% |
| FY24 | 298 | 18% | 34 | 5% | 4% |
| FY25 | 325 | 18% | 35 | 6% | 4% |
Slow but very steady, with no debt.
5. Valuation
- CMP: ₹494
- Book Value: ₹736
- P/E: 16.3
- P/B: 0.67
Fair Value Range (based on blended DCF, Book Value and earnings growth):
➡ ₹620 – ₹720
Undervalued from every known metric. But it’s illiquid and under-researched.
6. What’s Cooking – News, Triggers, Drama
- IEPF transfer notice: Shares being moved to IEPF—might cause temporary stock tightness.
- Treasury Play: The company holds nearly ₹960 Cr in investments.
- Buyback Possibility? Zero debt and surplus cash might encourage management.
- Management Change: VP (Purchase) retired June 2025—some shakeup in procurement likely.
7. Balance Sheet
| Metric | FY25 (₹ Cr) |
|---|---|
| Equity Capital | 7 |
| Reserves | 1,079 |
| Borrowings | 0 |
| Fixed Assets | 134 |
| Investments | 962 |
| Other Assets | 96 |
| Total Assets | 1,196 |
Key Points:
- Zero debt
- 80% of assets are financial investments
- Extremely conservative accounting
8. Cash Flow – Sab Number Game Hai
| Year | CFO | CFI | CFF | Net Cash |
|---|---|---|---|---|
| FY23 | 16 | -21 | -2 | -8 |
| FY24 | 40 | -35 | -4 | 1 |
| FY25 | 30 | -18 | -3 | 9 |
Key Points:
- Healthy cash from operations
- Most outflows into investments
- Cash flow stable; no red flags
9. Ratios – Sexy or Stressy?
| Ratio | FY25 |
|---|---|
| ROCE | 6% |
| ROE | 4% |
| OPM | 18% |
| D/E | 0.00 |
| Working Capital Days | 87 |
| Cash Conversion Cycle | -42 |
Verdict:
Operational efficiency? Average.
Balance sheet? Rockstar.
Return ratios? Still learning how to spell “sexy”.
10. P&L Breakdown – Show Me the Money
| FY25 | ₹ Cr |
|---|---|
| Revenue | 325 |
| Op Profit | 59 |
| OPM % | 18% |
| Other Income | -4 |
| Depreciation | 10 |
| PBT | 45 |
| Tax | 10 |
| Net Profit | 35 |
| EPS | 23.7 |
Other income was negative due to MTM losses. But core ops did fine.
11. Peer Comparison
| Company | CMP ₹ | P/E | ROCE | ROE | Mkt Cap (₹ Cr) | P/BV |
|---|---|---|---|---|---|---|
| Bosch | 38,645 | 56 | 21% | 15% | 1,14,000 | 8.2 |
| Schaeffler India | 4,172 | 64 | 26% | 19% | 65,200 | 12.1 |
| Uno Minda | 1,117 | 69 | 19% | 17% | 64,151 | 11.2 |
| Endurance Tech | 2,700 | 46 | 18% | 15% | 38,000 | 6.6 |
| Hind. Composites | 494 | 16 | 6% | 4% | 733 | 0.67 |
Clearly a tortoise among hares. But this one has a gold-plated shell.
12. Miscellaneous – Shareholding, Promoters
- Promoter Holding: 74.98% (rock solid, unchanged for years)
- FIIs/DIIs: Nil
- Public: 25%
- Shareholders: ~15,200
High promoter skin-in-the-game, zero institutional ownership. Classic retail trap or opportunity? You decide.
13. EduInvesting Verdict™
Hindustan Composites Ltd is one of those old-money companies—industrial in name, but treasury in soul. If the manufacturing doesn’t excite you, the ₹960 Cr investment portfolio definitely should. At 0.67x Book, it’s cheaper than an Ola S1 Pro after subsidy.
It’s boring. It’s hidden. It’s overlooked. But it’s also stable, cash-rich, and criminally undervalued.
Brake hard. Think harder.
Metadata
– Written by EduInvesting Analyst | 18 July 2025
– Tags: Hindustan Composites, Brake Lining, Auto Ancillary, Undervalued Stocks, Treasury Plays, Multibagger Logic, Hidden Gems, Old Economy Stocks
