Cupid Ltd: Attractive Valuation Post Significant Correction

India focused Portfolio Advisory - Exp of 40+years, Das Capital Management and Advisors

Arun Thirumalai

India focused Portfolio Advisory - Exp of 40+years

Das Capital Management and Advisors

Das Capital is a research boutique with an aim to continuously map and plan the investment needs of investors focused on India. We have a six member research team with a combined experience of over 40 years as a part of our investment wing. Our team assisted in the setup of Premji Investments, which was one of India’s first family offices focused to managing Mr.Azim Premji personal wealth. We also serve as a research team to two Indian private equity energy funds “Small is Beautiful” and “KSK Emerging India Energy Fund”.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/7097" target="_blank" data-smartkarma-citation="entities:7097">Cupid Ltd (CUPD IN)</a> is involved in the manufacturing of Male Latex condoms, Female Latex condoms and Lubricants among other products. Cupid Ltd is one of the two companies in the world to be pre-qualified by the World Health Organization(WHO) and United Nations Population Fund(UNFPA) for worldwide public distribution of condoms. The company has an order book worth INR 950 mn of confirmed and repeat orders and is currently pursuing tenders from countries like India, South Africa, Brazil, United States of America etc, with whom the company already has long-term relationships.
Growth Drivers
<ul>
<li>
Low use of contraceptives among the sexually active women: The average use of modern contraceptive among women aged 15- 49 in more developed regions of the world in 2017 was 69% whereas the average for least developed regions was 40%. This provides opportunities for companies like Cupid Ltd to work with governments of these regions to help create awareness and encourage the use of condoms.</li>
</ul>
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<li class="ILfuVd yZ8quc">
Increasing number of people HIV in Southern Sub-Saharan Africa: The share of the population with HIV in Southern Sub-Saharan Africa is 16.4% about 22 times more than the world average of 0.73%. 72 percent of people with HIV positive were based in Sub-Saharan Africa. It is of paramount importance for the local governments of these countries to work with the World Health Organization and other international agencies to eradicate HIV/ AIDS. Cupid being pre-qualified by the WHO and UNFPA for worldwide public distribution of condoms is in the right position to take part in these programs.
</li>
</ul>
Due to these factors, we expect the company to clock in a growth rate of 17.35% CAGR in short to medium term 
Valuation: The company is currently trading at 15.4x its FY18 EPS, 16x its FY19 EPS and 12.3x of its FY20 EPS. The stock has seen higher volatility in the recent months; we believe the PE of 15.4x expensive. We await a reasonable correction before we could change our view with respect to valuation.

Cupid Ltd (CUPD IN) is involved in the manufacturing of Male Latex condoms, Female Latex condoms and Lubricants among other products. Cupid Ltd is one of the two companies in the world to be pre-qualified by the World Health Organization(WHO) and United Nations Population Fund(UNFPA) for worldwide public distribution of condoms. The company has an order book worth INR 950 mn of confirmed and repeat orders and is currently pursuing tenders from countries like India, South Africa, Brazil, United States of America etc, with whom the company already has long-term relationships.
Growth Drivers


Low use of contraceptives among the sexually active women: The average use of modern contraceptive among women aged 15- 49 in more developed regions of the world in 2017 was 69% whereas the average for least developed regions was 40%. This provides opportunities for companies like Cupid Ltd to work with governments of these regions to help create awareness and encourage the use of condoms.



Increasing number of people HIV in Southern Sub-Saharan Africa: The share of the population with HIV in Southern Sub-Saharan Africa is 16.4% about 22 times more than the world average of 0.73%. 72 percent of people with HIV positive were based in Sub-Saharan Africa. It is of paramount importance for the local governments of these countries to work with the World Health Organization and other international agencies to eradicate HIV/ AIDS. Cupid being pre-qualified by the WHO and UNFPA for worldwide public distribution of condoms is in the right position to take part in these programs.


Due to these factors, we expect the company to clock in a growth rate of 17.35% CAGR in short to medium term 
Valuation: The company is currently trading at 15.4x its FY18 EPS, 16x its FY19 EPS and 12.3x of its FY20 EPS. The stock has seen higher volatility in the recent months; we believe the PE of 15.4x expensive. We await a reasonable correction before we could change our view with respect to valuation. 

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