Why is HP Adhesives Ltd falling/rising?

Recent Price Movement and Market Position

HP Adhesives Ltd’s stock has been under pressure for several sessions, recording a consecutive four-day decline that has eroded nearly 5% of its value in that period. The share price is currently hovering just 1.52% above its 52-week low of ₹40.05, signalling persistent weakness. The stock’s performance today also lagged behind its sector peers by 1.37%, underscoring its relative underperformance within the adhesives and related industries.

Technical indicators further highlight the bearish sentiment, with the stock trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This technical positioning often signals sustained selling pressure and a lack of short-term momentum to reverse the downtrend.

Comparative Returns Highlight Underperformance

When benchmarked against the broader market, HP Adhesives Ltd’s returns paint a stark picture. Over the past year, the stock has plummeted by 47.86%, in sharp contrast to the Sensex’s gain of 7.72% during the same period. This negative trajectory extends over three years as well, with the stock declining by 45.92% while the Sensex surged by over 40%. Such a divergence indicates that the company has struggled to keep pace with broader market growth and investor expectations.

Fundamental Challenges Weighing on the Stock

Despite a low debt-to-equity ratio averaging zero, which typically suggests a conservative capital structure, HP Adhesives Ltd has faced significant headwinds in profitability. The company’s return on equity stands at 8.7%, which, while respectable, has not been sufficient to offset other negative factors. The stock’s price-to-book value ratio of 2 indicates it is trading at a discount relative to its peers’ historical valuations, yet this valuation advantage has not translated into positive returns for investors.

Profitability metrics reveal a concerning trend. Over the past year, the company’s profits have declined by 21.8%, and its operating profit growth over the last five years has been modest at an annualised rate of 16.27%. More recently, the nine-month profit after tax (PAT) for the period ending September 2025 stood at ₹12.21 crore, reflecting a contraction of 20.69%. Quarterly earnings per share (EPS) have also hit a low of ₹0.38, signalling subdued earnings momentum.

Investor Sentiment and Institutional Participation

Investor confidence appears to be waning, particularly among institutional investors who typically possess greater analytical resources. Institutional holdings have decreased by 1.36% over the previous quarter, with these investors now collectively holding a negligible 0.02% stake in the company. This retreat by institutional players often signals concerns about the company’s fundamentals and future prospects, which can exacerbate selling pressure.

Meanwhile, retail investor participation has shown some signs of increased activity, as evidenced by a near 90% rise in delivery volume on 07 Jan compared to the five-day average. However, this has not been sufficient to arrest the stock’s decline or reverse the negative trend.

Long-Term Outlook and Market Positioning

HP Adhesives Ltd’s underperformance is not limited to recent months but extends over multiple years. The stock has consistently lagged behind the BSE500 index over one-year, three-year, and three-month periods. This sustained underperformance, coupled with flat or declining earnings and reduced institutional interest, has contributed to the stock’s current weakness.

In summary, the decline in HP Adhesives Ltd’s share price on 08-Jan is primarily driven by disappointing financial results, weak earnings growth, and diminished institutional investor confidence. The stock’s technical indicators and comparative returns further reinforce the bearish outlook, making it a challenging proposition for investors seeking growth or stability in this sector.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →