Ambika Cotton Mills Ltd Valuation Shifts to Fair Amidst Mixed Market Returns

Valuation Metrics and Recent Changes

As of early February 2026, Ambika Cotton Mills trades at ₹1,279.65, up 1.39% from the previous close of ₹1,262.05. The stock’s price-to-earnings (P/E) ratio stands at 11.82, a figure that has contributed to the recent downgrade in its valuation grade from attractive to fair. This P/E multiple is moderate when compared to the sector’s wide range, where peers such as R&B Denims and SBC Exports command P/E ratios of 42.61 and 60.86 respectively, categorised as very expensive. Conversely, companies like Indo Rama Synthetic and Mafatlal Industries maintain more attractive valuations with P/E ratios below 9.

The price-to-book value (P/BV) ratio for Ambika Cotton is currently 0.78, indicating the stock is trading below its book value. This metric suggests a degree of undervaluation, yet the shift in overall valuation grade signals that other factors, including earnings growth prospects and market sentiment, have tempered enthusiasm.

Enterprise Value Multiples and Profitability

Enterprise value to EBITDA (EV/EBITDA) for Ambika Cotton is 5.32, which is relatively low compared to many peers, signalling potential value. For instance, Sumeet Industries and Pashupati Cotspin exhibit EV/EBITDA multiples above 30, reflecting their premium pricing. The company’s EV to EBIT ratio is 6.76, and EV to capital employed stands at 0.72, both suggesting efficient capital utilisation relative to valuation.

Profitability metrics reveal a return on capital employed (ROCE) of 10.69% and a return on equity (ROE) of 6.62%. While these returns are modest, they are consistent with the company’s valuation and industry norms. The dividend yield of 2.89% adds an income component that may appeal to yield-focused investors.

Comparative Valuation Within the Garments & Apparels Sector

When benchmarked against its peers, Ambika Cotton’s valuation appears more reasonable. The company’s P/E ratio of 11.82 is significantly lower than the sector heavyweights such as Pashupati Cotspin (90.32) and AB Cotspin (93.27), both categorised as very expensive. This disparity highlights Ambika Cotton’s relative affordability, albeit with tempered growth expectations.

On the other hand, some peers like Indo Rama Synthetic and Sportking India are rated as very attractive or attractive, with P/E ratios of 7.95 and 10.01 respectively. These companies also exhibit PEG ratios above zero, indicating some earnings growth expectations, whereas Ambika Cotton’s PEG ratio remains at zero, suggesting flat or uncertain growth prospects.

Stock Performance and Market Context

Ambika Cotton’s recent stock performance has been mixed relative to the broader market. Over the past week, the stock surged 6.18%, outperforming the Sensex’s 0.90% gain. However, over longer horizons, the stock has lagged the benchmark. Year-to-date returns stand at 3.54% versus a Sensex decline of 3.46%, but the one-year and three-year returns are negative at -14.85% and -17.71% respectively, compared to Sensex gains of 7.18% and 38.27% over the same periods.

Over five and ten years, Ambika Cotton has delivered cumulative returns of 28.86% and 59.66%, which, while positive, trail the Sensex’s robust 77.74% and 230.79% gains. This performance gap underscores the challenges the company faces in generating sustained shareholder value relative to the broader market.

Mojo Score and Rating Update

MarketsMOJO has recently upgraded Ambika Cotton’s Mojo Grade from Sell to Hold as of 30 December 2025, reflecting a more balanced outlook. The current Mojo Score stands at 52.0, indicating a moderate investment appeal. The market capitalisation grade is 4, suggesting a mid-tier size within its sector. This rating upgrade aligns with the shift in valuation grade from attractive to fair, signalling cautious optimism among analysts.

Investment Considerations and Outlook

Investors should weigh Ambika Cotton’s fair valuation against its modest profitability and subdued growth prospects. The company’s low P/BV ratio and reasonable EV multiples offer some margin of safety, but the lack of earnings growth, as indicated by a PEG ratio of zero, may limit upside potential. The dividend yield near 3% provides some income cushion, which could be attractive in a low-yield environment.

Comparatively, the sector contains both highly valued and attractively priced stocks, making selective stock picking essential. Ambika Cotton’s Hold rating suggests that investors may prefer to monitor the stock for further developments before committing additional capital.

Conclusion: Valuation Realignment Reflects Market Realities

Ambika Cotton Mills Ltd’s transition from an attractive to a fair valuation grade encapsulates the evolving market dynamics within the Garments & Apparels sector. While the stock remains reasonably priced relative to many expensive peers, its limited growth prospects and moderate returns on capital temper enthusiasm. The recent Mojo Grade upgrade to Hold reflects this nuanced view, suggesting that investors adopt a cautious stance.

Given the stock’s mixed performance against the Sensex and sector peers, a thorough analysis of fundamentals and valuation remains crucial. Ambika Cotton’s current metrics offer a balanced risk-reward profile, but investors seeking higher growth or momentum may find more compelling opportunities elsewhere in the sector.

Overall, the company’s valuation realignment serves as a reminder of the importance of continuous monitoring and comparative analysis in portfolio management, especially in cyclical industries such as garments and apparels.

Unlock special upgrade rates for a limited period. Start Saving Now →