Cupid Ltd Multibagger Stock Buy Research Report

Cupid Ltd Multibagger

Cupid Ltd is already a multibagger stock because it has given a return of 14x in the past couple of years.

Such stocks become multibaggers because of the quality of growth and quality of management. The Companies enjoy a moat which prevents competition and enables generation of higher profits as compared to other listed companies.

In the Guide to finding multibagger stocks for 2017, the entire technique of how such stocks can be found has been explained in detail.

Cupid Ltd is a leading manufacturer of male and female condoms. It has the distinction of being the first Indian company to get WHO/UNFP pre-qualification.

The stock has become popular amongst investors because of its consistent good performance.

Update: Q4FY17 Result Review (Buy for target price of Rs. 390, upside 35%)

Cyclical weak quarter; Maintain BUY

Cupid Limited has reported its Q4FY17 results with a marginal revenue growth. The company has posted a net sales of Rs.178.8 mn, a growth of ~0.9%/-35.4% YoY/QoQ due to the cyclical nature of business.

FY17 was, historically, the best year for Cupid with a revenue/earnings growth of ~35.6%/29% as compared to FY16. The Company’s revenue stood at ~Rs.828 mn vs. 611 mn in FY16, due to a robust order book with ~52% of the revenue contribution from female condom. During the year, Cupid also witnessed 5% revenue contribution from its new lubricant jelly. Further, the Company continued to maintain a high EBITDA margin which stood at 39% due to increasing contribution high margin female condom and lubricant jelly. However, this is a ~242 bps contraction as compared to FY16 (~41.4% EBITDA margin), primarily due to domestic sales promotion activities and increase in input cost.

Expanding beyond condoms: Apart from adding value-added variants to its male and female condoms, the company plans on increasing its product basket beyond condoms, with: 1) hand sanitizers of various colors and flavors that retain hand moister, 2) vaginal cream for enhancing sexual pleasure, with no side effects, 3) wipes that will slow down premature ejaculation.

Valuation: We believe that Cupid has high potential to outperform over longer tenure on back of increasing focus on domestic marketing of male and female condoms and shift in product mix favoring female condoms. We maintain our ‘BUY’ rating for the stock, with a price target of Rs. 390 (35% upside), assigning 16x PE to FY19e EPS. The stock currently trades at 15.6x/13.9x/11.8x of FY17p/FY18e/FY19e.

Q1FY17 Results Of Cupid Ltd

In Q1FY17, Cupid Ltd reported total operating income of Rs.16 crore which was up 27% on a YoY basis. The EBITDA increased 32% to Rs. 6.5 crore. The margins improved from 39.4% to 41.1%. Cupid Ltd reported a net profit of Rs.4 crore which was up 27% on a YoY basis.

Income statement (Rs mn) Y/E Mar (Rsmn)

FY13 FY14 F Y15 FY16e FY17e FY18e
Net sales 284 195 444 631 915 1,327
growth (%) 9.3 (31.2) 127.5 42.0 45.0 45.0
COGS 167 114 185 252 356 516
Staff Cost 23 23 32 45 65 94
Change in Finished Goods 6 (10) 9 13 18 27
Other Expenses 57 47 91 127 183 264
EBITDA 31 21 128 195 293 425
growth (%) 14 (31) 506 52 50 45
Depreciation 14 15 18 20 22 26
EBIT 17 6 110 175 270 400
Other income 2 1 7 1 1 1
Interest paid 5 5 3 3 3 3
Extraordinary/Exceptional items (0) (1) (0)
PBT 14 2 114 174 269 398
Tax 5 1 37 57 88 130
Minority interest
PAT 9 1 77 117 182 269
Non-recurring items 0 1 0
Adjusted PAT 9 2 77 117 182 269
growth (%) 79 (81) 4,431 52 55 48

Balance sheet (Rs mn) Y/E Mar (Rsmn)

FY13 FY14 F Y15 FY16e FY17e FY18e
Cash & Bank balances 4 2 32 71 151 295
Other Current assets 71 100 161 213 294 409
Net fixed assets 172 163 156 171 209 244
Other non-current assets
Total assets 246 265 349 455 654 948
Current liabilities 27 33 64 53 70 95
Borrowings 21 32 22 22 22 22
Other non-current liabilities 13 14 22 22 22 22
Total liabilities 61 79 107 96 113 138
Share capital 111 111 111 111 111 111
Reserves & surplus 74 75 131 248 430 698
Shareholders’ funds 186 186 242 359 541 809
Total liabilities 246 265 349 455 654 948

Investment rationale for Cupid Ltd

Cupid Ltd has attractive fundamentals and a strong order book:

The revenue has grown by ~23% CAGR over FY11-15. In FY15, Cupid reported major growth from female condoms (from 10% of total sales in FY14 to 40% in FY15). In FY 15, the EBITDA/PAT margins were 29% / 17% respectively.

In 1QFY16, the EBITDA/PAT margins were as high as 38.5%/23 led by higher contribution from female condoms and higher exports.

Presently, Cupid Ltd has an order worth USD16.28mn to supply female condoms to the National Department of Health, South Africa. This order is to be executed over a period of 3 years starting from 1st July 2015 to 30th June 2018.

In addition, Cupid Ltd has signed a 3 year Agreement with United Nations Population Fund.

Potential for growth is high:

The potential for growth in India is very high because the population stands at ~1.27bn and ~48% of this comprises of women.

Potential demand for female condoms could be 52 times the population of women in the age bracket of 15-44 (~280mn) i.e. ~14.5bn condoms per annum.

Empowerment of women can lead to growth in sales of female condoms:

As women are exposed to maximum risk of pregnancy and infection, female condoms help to protect them from pregnancy and sexually transmitted infections like Aids – HIV.

Female condoms are the safest method because it provides dual protection and is effective and can reduce the risk of HIV infection by 97%.

Reasonable Valuations:

Cupid stock is not very expensive on the valuations front. Cupid Ltd is presently trading at 12x FY18 P/E.

The stock is expected to remain in a bullish trend because of the following factors:

(i) Good financial health with Rs. 26 crore of cumulative Free Cash Flow generation over next 3 years;

(ii) increase in operating margins to 300-400bps due to better product mix;

(iii) Growth in EPS by 52% CAGR.


Cupid Ltd is debt free and has a small equity base of Rs.9.71 crore. The EPS for Q1FY17 stands at Rs.3.45 v/s Rs.2.71 on a YoY basis.

There is a non-exclusive long term agreement between Cupid Ltd and the United Nations Population Fund (UNFPA) for the supply of female condoms over the next 3 years. Cupid Ltd has also received an order worth Rs.103 crore from the National department of Health (NDOH) of South Africa. This order will be completed by FY 2018-19.

Because of all these positive attributes, one can say that Cupid Ltd has the potential to become a multibagger stock.

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Comment (1)

  1. Anilkumar Karimbanakkal

    Thanks for sharing information.. I gonna buy this!


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