Damodar Industries Limited manufactures, processes, and trades in cotton and synthetic blended yarns in India. It exports its products to approximately 40 countries across Europe, South Africa, South America, Australia, Korea, Belgium, Singapore, Italy, Egypt, and the Gulf countries. The company was formerly known as Damodar Threads Limited and changed its name to Damodar Industries Limited in January 2013. Damodar Industries Limited was incorporated in 1987 and is headquartered in Mumbai, India.

India

Damodar Industries Limited

Consumer Cyclical

The company pays dividends from time to time. It has paid dividends in less than half the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. 

DAMODARIND.NS reported revenue of INR 5 545mn in the last 12 months, down 30% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 85% from FY23 to INR 0.56.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 13ppts and its growth accelerated by 4ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 7.7% in the last 12 months, up from 7.6% in FY23. 

Historically, DAMODARIND.NS has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 0.2%, down from 1.1% in FY23. 

Damodar Industries Limited reported a return on equity (RoE) of 1.0% in the last 12 months, down from 7.3% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 0.6%, below the peers. 

Another important profitability metric, return on assets (RoA), amounted to 0.3% in the last 12 months, a decrease from 2.0% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.3 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

DAMODARIND.NS has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is unstable and is unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, bleak profitability, negligible return on capital, weak debt servicing capacity, inadequate interest coverage, and an unfavourable capital structure.

In highly turbulent market conditions, DAMODARIND.NS is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, DAMODARIND.NS is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from moderate to notable. We would also like to highlight the notable intraday volatility of the instrument. 

Based on key historical and expected multiples, the stock is undervalued relative to its peers. In particular, the stock is overpriced on P/E, 'cheap' on EV/EBITDA, undervalued on P/FCF. 

Damodar Industries Limited

₹ 34.95

3

Damodar Industries Limited

₹ 34.95

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

₹ 34.95

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