Laxmi Cotspin Limited engages in processing and selling textiles in India. The company offers cotton yarns, bales, seeds, and oil; fabrics; and oil cakes. It exports its products to Asian and European countries. Laxmi Cotspin Limited was incorporated in 2005 and is based in Jalna, India.

India

Laxmi Cotspin Limited

Consumer Cyclical

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

LAXMICOT.NS reported revenue of INR 1 298mn in the last 12 months, down 13% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 87% from FY23 to INR -0.61.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 8ppts over six months and grown 6ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 0.2% in the last 12 months, up from -1.3% in FY23. 

Historically, LAXMICOT.NS has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -0.8%, a growth from -5.5% in FY23. 

Laxmi Cotspin Limited reported a return on equity (RoE) of -1.7% in the last 12 months, up from -14.8% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to -3.0%, below the peers. 

Another important profitability metric, return on assets (RoA), amounted to -1.7% in the last 12 months, an increase from -7.8% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -0.4 in the past several years. This ratio implies a fragile 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.

LAXMICOT.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 very 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. We note low margin volatility and an favourable capital structure, among the positive credit factors. 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, and inadequate interest coverage.

In highly turbulent market conditions, LAXMICOT.NS is volatile. In other words, the stock will fall much more than 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 large. 

In normal market circumstances, LAXMICOT.NS is highly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change somewhat erratically. The stock's losses on its worst days (less than 1-5% of the time) will range from significant to substantial. We would also like to highlight the substantial intraday volatility of the instrument. 

Based on key historical and expected multiples, the stock is slightly undervalued relative to its peers. Specifically, the stock is fairly valued on P/E, overvalued on EV/EBITDA, underpriced on P/FCF. 

Laxmi Cotspin Limited

₹ 28.5

3

Laxmi Cotspin Limited

₹ 28.5

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

₹ 28.5

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