Salona Cotspin Ltd: Valuation Shift Signals Renewed Price Attractiveness Amid Mixed Market Returns

Valuation Metrics: A Closer Look

Salona Cotspin’s current price stands at ₹251.95, up 1.67% from the previous close of ₹247.80, with a 52-week trading range between ₹212.95 and ₹335.00. The company’s price-to-earnings (P/E) ratio is an eye-catching 13,258.62, an outlier that reflects either negligible or negative earnings, rendering traditional P/E valuation less meaningful. However, the price-to-book value (P/BV) ratio at 1.56 is considerably more grounded, indicating the stock trades at a modest premium to its net asset value.

Enterprise value to EBITDA (EV/EBITDA) stands at 11.39, which is within a reasonable range for the Garments & Apparels sector, suggesting that the company’s operational earnings before interest, taxes, depreciation, and amortisation are valued fairly by the market. The EV to EBIT ratio of 16.15 is slightly elevated but not excessive, signalling moderate expectations for profitability improvement.

Other valuation parameters include an EV to capital employed ratio of 1.15 and EV to sales of 0.58, both indicating that the company is valued attractively relative to its capital base and revenue generation. The PEG ratio is reported as zero, reflecting the absence of meaningful earnings growth projections at present.

Comparative Valuation: Peers and Sector Context

When compared with its peers, Salona Cotspin’s valuation profile stands out. For instance, R&B Denims and SBC Exports are classified as very expensive, with P/E ratios of 55.59 and 50.61 respectively, and EV/EBITDA multiples soaring above 38 and 53. Similarly, Pashupati Cotspin trades at a P/E of 105.71 and an EV/EBITDA of 59.87, underscoring a premium valuation that contrasts sharply with Salona Cotspin’s more moderate multiples.

On the other hand, companies like Sportking India and Himatsingka Seide are rated attractive or very attractive, with P/E ratios of 12.26 and 8.01 and EV/EBITDA multiples of 7.3 and 8.76 respectively. This places Salona Cotspin in a middle ground, where its valuation is attractive but not the cheapest in the sector, reflecting a nuanced market view on its prospects.

Financial Performance and Quality Metrics

Salona Cotspin’s return on capital employed (ROCE) is 7.81%, while return on equity (ROE) is a mere 0.01%, signalling very limited profitability for shareholders. Dividend yield is low at 0.40%, reflecting either a conservative dividend policy or constrained cash flows. These metrics highlight the company’s current struggles to generate robust returns despite its valuation attractiveness.

Market capitalisation grade is rated 4, indicating a mid-sized company with moderate liquidity and market presence. The Mojo Score of 28.0 and a recent downgrade from Sell to Strong Sell on 20 Feb 2026 further underline the cautious stance taken by analysts, reflecting concerns over earnings quality and growth prospects.

Stock Performance Relative to Sensex

Over the past year, Salona Cotspin has underperformed the benchmark Sensex, delivering a negative return of -3.10% compared to the Sensex’s robust 9.35% gain. Year-to-date, the stock is down 2.72%, roughly in line with the Sensex’s -2.82%. Longer-term returns tell a more positive story, with a five-year gain of 180.72% far outpacing the Sensex’s 62.73%, and an impressive ten-year return of 755.52% compared to the Sensex’s 249.29%. This suggests that while recent performance has been lacklustre, the stock has historically rewarded patient investors.

Valuation Grade Upgrade: What It Means for Investors

The upgrade in Salona Cotspin’s valuation grade from very attractive to attractive indicates a subtle shift in market perception. While the stock remains expensive on a P/E basis due to negligible earnings, improvements in price-to-book and enterprise multiples suggest that investors are beginning to price in potential operational stabilisation or asset value realisation. This re-rating could be a precursor to a more sustained recovery if the company can improve profitability and capital efficiency.

However, the strong sell Mojo Grade and low Mojo Score caution investors to remain vigilant. The company’s fundamentals remain challenged, and the valuation improvement may reflect a technical adjustment rather than a fundamental turnaround. Investors should weigh the attractive valuation against the risks of earnings volatility and sector headwinds.

Outlook and Investor Takeaways

Salona Cotspin’s valuation attractiveness, particularly on price-to-book and EV multiples, offers a potential entry point for value-oriented investors willing to tolerate near-term earnings uncertainty. The company’s historical outperformance over five and ten years demonstrates its capacity for long-term wealth creation, though recent downgrades and weak profitability metrics temper enthusiasm.

Investors should monitor upcoming quarterly results closely for signs of margin improvement or revenue growth acceleration. Additionally, tracking sector trends in Garments & Apparels and peer valuation movements will provide context for Salona Cotspin’s relative attractiveness. Given the current strong sell rating and low Mojo Score, a cautious approach with a focus on risk management is advisable.

In summary, while the valuation shift to attractive signals a more favourable pricing environment, fundamental challenges remain. The stock may appeal to contrarian investors seeking undervalued opportunities in the garments sector, but it is not without significant risks.

Summary of Key Valuation and Performance Metrics

Current Price: ₹251.95 | P/E Ratio: 13,258.62 | P/BV: 1.56 | EV/EBITDA: 11.39 | ROCE: 7.81% | ROE: 0.01% | Dividend Yield: 0.40% | Mojo Score: 28.0 (Strong Sell)

Five-Year Return: 180.72% vs Sensex 62.73% | Ten-Year Return: 755.52% vs Sensex 249.29%