Hindustan Tin Works Ltd Downgraded to Strong Sell Amid Deteriorating Quality Metrics

Quality Grade Downgrade and Rating Change

On 12 February 2026, MarketsMOJO revised Hindustan Tin Works Ltd’s mojo grade from Sell to Strong Sell, accompanied by a drop in its quality grade from average to below average. The company’s mojo score now stands at a low 23.0, underscoring significant concerns about its financial health and operational performance. This downgrade is particularly notable given the company’s previous standing and the competitive packaging industry backdrop.

Return Ratios Show Signs of Weakness

Return on Equity (ROE) and Return on Capital Employed (ROCE) are critical indicators of a company’s efficiency in generating profits from shareholders’ equity and capital investments respectively. Hindustan Tin Works’ average ROE is 7.87%, while its average ROCE is 7.57%. Both figures are modest and have contributed to the below average quality rating. When compared to industry peers such as Sh. Jagdamba Polymers, which holds a good quality rating, Hindustan Tin Works’ returns lag behind, indicating less effective capital utilisation.

Growth Trends Reflect Inconsistency

Over the past five years, the company’s sales growth averaged 6.92%, a moderate pace but not robust enough to inspire confidence. More concerning is the negative EBIT growth of -1.10% over the same period, signalling operational challenges and pressure on earnings before interest and tax. This contrasts with competitors like Everest Kanto and Sh. Rama Multi-Tech, which maintain average quality grades supported by steadier growth trajectories.

Leverage and Debt Metrics Raise Red Flags

Hindustan Tin Works’ debt profile also contributes to its deteriorating fundamentals. The average Debt to EBITDA ratio stands at 2.77, indicating a relatively high level of debt compared to earnings, which could strain cash flows. Additionally, the Net Debt to Equity ratio of 0.39 suggests moderate leverage but combined with weak earnings growth, this level of debt could amplify financial risk. The EBIT to Interest coverage ratio of 2.66, while above the critical threshold of 1.5, is not comfortably high, implying limited buffer to service interest expenses in adverse conditions.

Operational Efficiency and Capital Turnover

Sales to Capital Employed ratio averages 1.51, reflecting the company’s ability to generate sales from its capital base. While this is a positive indicator, it is insufficient to offset the pressures from declining EBIT and modest returns. The tax ratio of 27.41% and a low dividend payout ratio of 7.32% further suggest that the company is retaining earnings but not translating them into strong growth or shareholder returns.

Shareholding and Market Performance

Institutional holding in Hindustan Tin Works is relatively low at 7.48%, which may reflect limited confidence from large investors. The company has zero pledged shares, which is a positive sign indicating no immediate risk of promoter share encumbrance. However, the stock’s recent market performance has been volatile. It closed at ₹129.00 on 13 February 2026, down 2.57% from the previous close of ₹132.40. The 52-week price range is ₹106.90 to ₹179.00, showing significant price fluctuation.

Stock Returns Versus Sensex Benchmark

Hindustan Tin Works’ stock returns have been mixed when compared to the Sensex. While the stock outperformed the benchmark over the 1-month (8.72% vs -0.24%) and year-to-date (10.92% vs -1.81%) periods, it underperformed significantly over the 1-year (-21.44% vs 9.85%) and 3-year (23.21% vs 37.89%) horizons. Over the longer 5-year period, the stock delivered a strong cumulative return of 139.78%, more than double the Sensex’s 62.34%. However, the 10-year return of 139.78% trails the Sensex’s 264.02%, indicating that the company has lagged broader market gains over the decade.

Comparative Industry Positioning

Within the packaging sector, Hindustan Tin Works’ below average quality grade places it behind peers such as Sh. Jagdamba Polymers and Bluegod Entertainment, which enjoy good quality ratings. Other companies like Kanpur Plastipack and Shree Tirupati Balaji also share a below average rating, indicating a cluster of firms facing operational or financial challenges. The company’s relatively low institutional holding and modest dividend payout further differentiate it from more stable sector players.

Implications for Investors

The downgrade to Strong Sell reflects a comprehensive reassessment of Hindustan Tin Works’ fundamentals. Investors should be wary of the company’s declining EBIT growth, modest returns on capital, and elevated leverage ratios. While the stock has shown some short-term price resilience, the underlying business metrics suggest caution. The company’s ability to improve operational efficiency, reduce debt, and enhance profitability will be critical to reversing its downward quality trajectory.

Outlook and Strategic Considerations

Given the current financial profile, Hindustan Tin Works faces headwinds in regaining investor confidence. The packaging industry remains competitive, and companies with stronger balance sheets and consistent earnings growth are likely to attract more favourable valuations. Hindustan Tin Works must focus on improving EBIT margins, managing debt prudently, and enhancing capital returns to regain a more favourable quality rating.

Summary

Hindustan Tin Works Ltd’s recent downgrade to a Strong Sell rating and below average quality grade reflects a deterioration in key financial and operational metrics. The company’s modest ROE and ROCE, negative EBIT growth, and elevated leverage ratios highlight challenges in sustaining profitability and managing debt. While the stock has delivered strong long-term returns relative to the Sensex, recent performance and fundamentals suggest caution. Investors should monitor the company’s efforts to improve operational efficiency and capital management before considering exposure.

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