Everything about MULTIBAGGERS

Important Question: What is a multibagger ?  

A multibagger is a stock that has multiplied its investor's money. (this is PAST)

More important Question: What is a potential multibagger ?

A potential multibagger is a stock which can multiply your money. (in the FUTURE)

In other words, it is a stock which can provide you with multifold profits/returns

If a stock gives you 100% profits (doubles your money) then it is a 2-bagger.
If a stock gives you 300% returns (quadruples your money) then it is a 4-bagger
If a stock gives you 700% returns, then it is a 8-bagger
If it gives you 900% profits, then it is 10-bagger

....we can go on.....    

Examples of recent (past) multibaggers: Over last 1 - 2 years      

 1. Granules India (Pharma): 95 rs (as 22Mar2013) and 929 rs (price as on 19Sep2014)
          Almost a 10-bagger (profit 900%): Time frame: 18 months (approx)

2. JK Tyre (Tyres): 82 rs (as 28Aug2013) and 498 rs (price as on 19Sep2014)
          Almost a 6-bagger (profit 500%): Time frame: 12 months (approx)

3. eClerx (IT/BPO): 600 rs (as 25Mar2013) and 1440 rs (price as on 02Sep2014)
          Almost a 2-bagger (profit 120%): Time frame: 18 months (approx)

4. Gati (Logistics): 24 rs (as 01Oct2013) and 190 rs (price as on 12Sep2014)
          Almost a 8-bagger (profit 700%): Time frame: 12 months (approx)  

5. Himatsingka Seide (Textile): 30 rs (as 26Mar2013) and 100 rs (price as on 12Sep2014)
          Almost a 3-bagger (profit 200%): Time frame: 18 months (approx)

6. RS Software (IT/software): 120 rs (as 16Aug2013) and 820 rs (price as on 18Sep2014)
          Almost a 6-bagger (profit 500%): Time frame: 12 months (approx)

7. Gabriel India (Auto ancillary): 20 rs (as 24Jun2013) and 84 rs (price as on 12Sep2014)
          Almost a 4-bagger (profit 300%): Time frame: 15 months (approx)

VERY IMPORTANT POINT:
Observe that this happened in the scenario of a massive bull run (hope rally) in the indian stock markets with a bullish backdrop of global stock markets driven by easy liquidity. This is a unique situation (just like this, every other situation in the market will be different).    


Phenomenal (past) multibaggers: Over last decade (adjusted for stock splits and bonuses)

1. Shriram Transport (Finance): 25 rs (as 07Jul2004) and 1000 rs (price as on 13Jun2014)
          Almost a 40-bagger (profit 3900%): Time frame: 10 years (approx)    

2. Lupin (Pharma): 70 rs (as 09Mar2004) and 1400 rs (price as on 19Sep2014)
          Almost a 20-bagger (profit 1900%): Time frame: 10 years (approx)  

3. AVT Natural (Agro): 90 ps (as 24Jun2004) and 50 rs (price as on 19Sep2014)
          Almost a 50-bagger (profit 5000%): Time frame: 10 years (approx)  

4. Dabur India (FMCG): 10 rs (as 02Jul2004) and 200 rs (price as on 20Aug2014)
          Almost 20-bagger (profit 1900%): Time frame: 10 years (approx)  

5. Atul Auto (Auto): 30 rs (as 26Mar2013) and 100 rs (price as on 12Sep2014)
          Almost a 3-bagger (profit 200%): Time frame: 18 months (approx)  

IMPORTANT OBSERVATION:
Multibaggers are not sector dependent. Most of them are very high quality companies.  


multibaggers
1. Marksans Pharma (Pharma): 12 rs (as 22Nov2013) and 48 rs (price as on 03Sep2014)
          Almost a 4-bagger (profit 300%): Time frame: 10 months (approx)  

2. Prakash Constrowell (Construction): 90 ps (as 15May2014) and 3.60 rs (price on 11Aug2014)      
          Almost a 4-bagger (profit 300%): Time frame: 14 months    

3. Trigyn Tech (IT/software): 21 rs (as 13Jan2014) and 52 rs (price as on 09Sep2014)
          Almost a 2/3-bagger (profit 150%): Time frame: 9 months (approx)  

4. Firstsource Solutions (IT/BPO): 20 rs (as 18Dec2013) and STILL HOLDING  


In this post, I have listed around 15 examples of past multibaggers. If you search enough, you will be able to find at least another 20 - 25 examples (of the past multibaggers) easily.

Try and search for some. It will be a learning exercise as well as fun. Cheers!!

Source - My colleageYogi

CAPRI GLOBAL CAPITAL - Worth a look?

Capri Global Capital.

Market cap= about Rs 600 crores

P/E=about 7 (considering TTM)

P/B=0.63

Background of company: It is erstwhile MoneyMatters for those who remember 2010 Housing Finance Scandal. The CEO was arrested by CBI for alleged bribing of PSU bank executives. Would like to caution that the earlier promoter Rajesh Sharma and associates still own about 25% of the shares.

  But story seems to have changed now and looks like a turn around story, Capri Global partners, a US based real estate investment group has taken the control of the company and now owns about 50% of the shares. Its chairman Quintin E Primo III is now Non Executive chairman of the Capri Global Capital India and is very serious about leveraging the expertise of Capri Capital to grow Capri Global India. And has been a successful international investor.

Quintin E Primo III a 1st generation entrepreneur is a Harvard MBA, built Capri Capital with a few others Harvard /Kellog/Wharton MBAs. Their background looks very solid.

Primo had a humble beginning and has grown Capri brick by brick. From what I have read and watched about him so far, have been impressed and he sounds like a very ethical person.

Capri Global has transitioned from fee based Investment advisers to a Lending organisation / a full fledged NBFC. One interesting aspect of Capri Global India is, its networth is about Rs 970 crores and no loan.

They have 3 verticals of lending , SME lending(Rs 280 crores) , Wholesale Lending (Rs 505 crores)and now they are planning  to finance affordable housing.

Whole sale lending consists mainly Residential real estate.

Their CAR is 94% compared to 15% of the regulatory norm hence they could borrow multiple times their current loan book, so huge potential. Technically they could stretch their loan book by another Rs 6000 crores. They have aggressive plans of expansion in tier two/three cities in next 2 years. The average age of the employees is just 31 years and there are only 145 employees.

The major risk and concern is Mr Rajesh Sharma is on board and holds about 25% of the company shares. Dont know whats the future strategy of the Capri Global, can a Foreign company own more than 50% in the NBFC? what is the regulation?

Capri Global Capital Limited (CGCL)


Company Profile -

Capri Global Capital Limited (CGCL) was set up in 1997. It is a Non-Banking Finance Company (NBFC) registered with Reserve Bank of India (RBI) as ND-SI (Non-Deposit taking systemically important) and is listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Until 2011, CGCL offered an entire bouquet of financial solutions and services with emphasis on debt advisory services and has executed transactions close to INR 50,000 crores during FY2009 to FY2011. In October 2010, we successfully completed a Qualified Institutional Placement (QIP) and raised INR 445 crores taking a foray into Asset Financing and the Lending business in FY2012, thus leveraging on its extensive domain knowledge and understanding.

We take pride in recognizing the fact that in a short period of time we have made significant disbursements fuelling the economy and help build enterprises. With a firm hold in the Wholesale Lending space, CGCL has now forayed into lending to Micro, Small and Medium Enterprises (MSME). Our focus continues to be on generating supreme quality asset book spread across multiple locations where MSME clusters exist. Our present product range includes - loans for Purchase of Equipment and Machinery, Working Capital loans, loans for Business or Capacity expansion, Term Loans against Property, loans for Purchase of Commercial Property, and Lease Rental Discounting.

Uneven Background -

It is erstwhile MoneyMatters for those who remember 2010 Housing Finance Scandal. The CEO was arrested by CBI for alleged bribing of PSU bank executives(same story as Bhushan Steel). Would like to caution that the earlier promoter Rajesh Sharma and associates still own about 25% of the shares.

But story seems to have changed now and looks like a turn around story, Capri Global partners, a US based real estate investment group has taken the control of the company and now owns about 50% of the shares. Its chairman Quintin E Primo III is now Non Executive chairman of the Capri Global Capital India and is very serious about leveraging the expertise of Capri Capital to grow Capri Global India. And has been a successful international investor.


Quintin E Primo III a 1st generation entrepreneur is a Harvard MBA, built Capri Capital with a few others Harvard /Kellog/Wharton MBAs. Their background looks very solid.

Primo had a humble beginning and has grown Capri brick by brick. From what I have read and watched about him so far, have been impressed and he sounds like a very ethical person.

Current Business -

Capri Global India is, its networth is about Rs 970 crores and no loan.

They have 3 verticals of lending , SME lending(Rs 280 crores) , Wholesale Lending (Rs 505 crores)and now they are planning  to finance affordable housing.

Whole sale lending consists mainly Residential real estate.

Their CAR is 94% compared to 15% of the regulatory norm hence they could borrow multiple times their current loan book, so huge potential. Technically they could stretch their loan book by another Rs 6000 crores. They have aggressive plans of expansion in tier two/three cities in next 2 years.

Our View -

Company is currently trading at PE of 7 and 0.6 of its book value price where many other company trading at their book value of 2-3 in lending finance business, this looks a dirt cheap stock. Further, promoters are buying from open market every year to the max. permissible limit of 5% which is also a boosting factor for me. A successful international chairman with lots of potential would be an additional gem into the basket. Considering all this factor, we can not rule out capri global to trade at 280-300 level in coming quarters. Hence, at CMP of 173 we recommend a buy for the target of 280.

HOW TO ANALYSE STOCKS IN DEPTH

ANALYSING A COMPANY- STOCK ANALYSIS BASICS, STEP-BY-STEP

Learning to do an in-depth stock analysis is not rocket science. Here's a step-by-step process that can be followed by any beginner stock enthusiast.

Pat Dorsey, Director of Stock Analysis, Morningstar Inc. in his very useful book -The Five Rules for Successful Stock Investing - suggests breaking down the process of evaluating the quality of a company into five areas -Growth, Profitability, Financial Health, Risks/Bear Case, and Management. These are the key areas to focus on when you are looking to do a stock analysis. His writings are the primary source for this article.

One word of caution, the following discussion is concerned only with evaluating the quality of the company. However, this is only half the story because even the best companies are poor investments if purchased at too high a price. Estimating the right price to pay for a company's shares- or Stock Valuation is the other half of the story.

GROWTH

Anyone looking to do a stock analysis for a company is probably attracted to it because of its Growth. The allure of growth has probably led more investors into temptation than anything else. High growth rates are heady stuff - a company that manages to increase its earnings at 30% for five years will triple its profits, and who wouldn't want to do that? Unfortunately a slew of academic research shows that strong earnings growth is not very persistent over a series of years; in other words a track record of high growth earnings growth does not necessarily lead to high earnings growth in the future.

Why is this? Because strong and rapidly growing profits attract intense competition. Companies that are growing fast and piling up profits soon find other companies trying to get a piece of the action for themselves.

You can't just look at a series of past growth rates and assume they'll predict the future - if investing were that easy, money managers would be paid much less!. And this stock analysis much shorter. Its critical to investigate the sources of a company’s growth rate and assess the quality of the growth. High-quality growth that comes from selling more goods and entering new markets is more sustainable than low-quality growth that's generated by merely cost-cutting or accounting tricks. 

Sources of Growth

Investigating the sources of growth is an important element in any stock analysis framework. How to look for sources of growth? In the long run, sales growth drives earnings growth. Although profit growth can out pace sales growth for a while if the company is able to do an excellent job of cutting costs or fiddling with the financial statements, this kind of situation isn't sustainable over the long haul - there's a limit to how much costs can be cut, and there are only so many financial tricks that companies can use to boost the bottomline. In general, sales growth stems from one of four areas:1. Selling more goods or services2. Raising prices3. Selling new goods or services4. Buying another company  

Quality of Growth

There are many ways of making growth look better than it really is, especially when we turn our attention to earnings growth rather than sales growth. (Sales growth is much more difficult to fake).

In general, when you are doing a stock analysis - any time that earnings growth outstrips sales growth by far, over a long period - for over 5-10 years - you need to dig into the numbers to see how the company keeps squeezing out more profits from lackluster sales growth. Stock analysis for sustainability of that growth becomes that much more critical. A big difference in the growth rate of net income and operating income or Cash flow from Operations can also hint at something unsustainable.

Any time you can't pinpoint the sources of a company's growth rate - or the reasons for a sharp divergence between the top and bottom lines, you should be wary of the quality of that growth rate.

PROFITABILITY

Now we come to the second-and in many ways, most crucial-part of the stock analysis process. How much profit is the company generating relative to the amount of money invested in the business? This is the real key to separating great companies form average ones. The higher the return, the more attractive the business.

Return on Assets (ROA)

We know the first component of ROA. Its simply Net Margin, or Net Income divided by Sales. And it tells us how much of each dollar of sales a company keeps as earnings, after paying all the costs of doing business. The second component is Asset Turnover, or Sales divided by Assets, which tells us roughly how efficient the firm is at generating revenue from each dollar/rupee of Assets.

Multiply these two, and we have Return on Assets. Net Income/Sales =Net Margin and Sales/Assets =Asset Turnover

ROA = Net Margin x Asset Turnover

Think of ROA as a measure of efficiency. Companies with high ROAs are better at translating Assets into Profits. ROA helps us understand that there are two routes to excellent operational profitability. You can charge high prices for your products (high margins) or you can turn over your assets quickly.

Rough benchmarks for stock analysis - ROA

All things being equal, the more asset-intensive a business, the more money must be reinvested into it to continue generating earnings. This is a bad thing. If a company has a ROA of 20%, it means that the company earned $0.20 for each $1 in assets. As a general rule, anything below 5% is very asset-heavy [manufacturing, railroads], anything above 20% is asset-light [advertising firms, software companies].

Return on Equity (ROE)

Just using ROA would be fine, if all companies were big piles of Assets, but many firms are atleast partially financed with debt, which gives their returns a leverage component, which we need to take into account. ROE lets us do this.

Return on Equity is a great overall measure of a company's profitability because it measures the efficiency with which a company uses shareholders' equity. Think of it as measuring profits per dollar of shareholders' capital.

Multiply ROA by the firm’s Financial Leverage ratio, and you have its Return on Equity.

Financial Leverage =Assets/Shareholders' Equity and Return on Equity =Return on Assets x Financial Leverage. Because Return on Equity =Net Margin x Asset Turnover

ROE = Net Margin x Asset Turnover x Financial Leverage

Financial Leverage is essentially a measure of how much debt a company carries, relative to shareholders' equity. Unlike Net Margins & Asset Turnover, for which higher ratios are almost unequivocally better, financial leverage is something you want to watch carefully. As with any kind of debt, a judicious amount can boost returns, but too much can lead to disaster.

So, we have three levers that can boost ROE - net margins, asset turnover and financial leverage.

Rough benchmarks for stock analysis - ROE

In general, any non-financial firm that can generate consistent ROEs above 15 percent without excessive leverage is atleast worth investigating. As of mid 2008, only about 10% of the non-financial firms in ValuePickr database were able to post an ROE above 15% for each of the past 5 years, so you can see how tough it is to post this kind of performance. And if you can find a company with consistent ROEs over 30%, there's a good chance you are really onto something.

Two Caveats when using ROE for stock analysis

First, Banks always have enormous financial leverage ratios, so don't be scared off by a leverage ratio that looks high relative to a non-bank. Additionally, since banks' leverage is always so high, you want to raise the bar for financial firms - look for consistent ROEs above 18% or so.

Second caveat is about firms with ROEs that look to good to be true, because they are usually just that. ROEs above 50% or so are often meaningless because they have probably been distorted by the firm's financial structure. Firms that have been recently spun off from parent firms, companies that have bought back much of their shares, and companies that have taken massive charges of ten have very skewed ROEs because their Equity base is depressed. When you see an ROE over 50%, check to see if the company has any of these above-mentioned characteristics.

Free Cash Flow

Cash Flow from Operations measures how much cash a company generates. It is the true touchstone of corporate value creation because it shows how much cash a company is generating from year to year. As useful as the Cash Flow statement is, it does not take into account the money that a firm has to spend on maintaining and expanding its business. To do this, we need to subtract Capital Expenditures, which is money used to buy fixed assets.

Free Cash Flow =Cash Flow from Operations - Capital Expenditure

Free Cash Flow enables us to separate out businesses that are net users of Capital - ones that spend more than they take in- from businesses that are net producers of Capital, because its only that excess cash that really belongs to shareholders. Free Cash Flow is sometimes referred to as "Owners Earnings" because that's exactly what it is: the amount of money the owner of a company could withdraw from the treasury without harming the company's ongoing business.

Rough benchmarks for stock analysis - Free Cash Flow

As with ROE it’s tough to generalise how much free cash flow is enough. However its reasonable to say that any firm that is able to convert more than 10% of Sales to Free Cash Flow (just divide Free Cash Flow by Sales to get this percentage) is doing a solid job at generating excess Cash.

Profitability Matrix

One good way to think about the returns a company is generating is to use the Profitability Matrix, which looks at a company's ROE relative to the amount of free cash flow it's generating. This Matrix can tell us a great deal about the kind of company we are analysing.

Enough for today, will update later.

AVT NATURAL MULTIBAGGER

I was suppose to post this last week. it was saved as a draft.

AVT Natural Products Ltd. is one of the finest, high quality, profitable, well managed and niche company based in Kerala. This is a 100% EOU. The various businesses of this agri company are Marigold Oleoresins, Spice Oleoresins & essential oils, value added beverages (mainly Decaffeinated tea). They have recently ventured into specific health suppliments (nutraceuticals). For more info check, http://www.avtnatural.com/  
 

The company belongs to the AV Thomas group which consists of business in diverse areas such as Plantations, Tea, Spices, Rubber, Leather, Food ingredients, biotech, etc. One of the group companies is AVT McCormick, a 50:50 joint venture between AVT and McCormick & Co Inc. of USA.  

PRESENT DAY NUMBERS  
CMP on Day15 Aug2014: Rs 43.25          Market cap: 650 crores          BV: 12          FV: 1          
Revenue FY14: 271 cr (FY13 255 cr)   Net profit FY14: 51 cr (FY13 50 cr)   EPS: 3.35 (FY13: 3.32)
Debt: ZERO    

BRIEF HISTORY
AVT Natural was formed in 1986. It started with Marigold cultivation on 200 acres of land, and has since gone up to 35,000 acres producing 100,000 metric tonnes of flowers with the support of 30,000 loyal farmers.

MULTIBAGGER POTENTIAL
1. The company has delivered 3 consecutive years of PAT of 50 CR plus (this during when global conditions have been challenging)
2. The company is a "Zero Debt" company as on 31st March 2014 (they walked the talk of becoming a ZD company as stated in their AR 2 years back)
3. Compounded profit growth has been around 32% over the last 10 years and RoE has been around 35% during the same period
4. The company has been maintaining a healthy dividend payout of over 20% over the last 10 years (with the exception of a couple years)
5. For the first time in its history, they clocked a revenue of 90 CR in Q1FY14; it is not far when QR will be 100 cr plus stepping up the threshold
6. The company has diversified into health supplements under the brand name "Optim Health". The launch was done in few select cities just recently.
For more into check, http://www.optimhealth.in/    

INTERESTING INFO
1. AVT Natural featured in the Forbes list of 200 best companies under a billion dollar revenue in the asia pacific region (in the year 2012)
2. The contract farming model followed by AVT is regarded as one of the best. Their endeavor is to ensure "Quality at source"
3. They have been audited and certified for Quality by BUREAU VERITAS in accordance with ISO 9001:2008
4. AVT has a win-win relationship with the farmers maximizing net returns to the farmers and ensuring quality produce for the company at optimum price.

MY TAKE
AVT Natural is already a proven SUPER MULTI BAGGER. From a stock price of 40 paisa in the year 2002 (adjusted for splits and bonuses) to a life time high of 50 rupees in the year 2015; this has multiplied investor wealth by approximately 110 times in a matter of 12 to 13 years.  
Even if we were to split the stock performance into 2 separate time periods; this stock has been a multibagger twice. 40 ps in year 2002 to 8 rs in 2008 (a 20-bagger); and 4 rs in 2009 to 40 rs in 2014 (a 10-bagger).

Now the million rupee question is "Will it became a multibagger  ?". I do believe it has all the potential and capability to become a multibagger yet again from the 40 - 45 levels. Tremendous strength in the existing product portfolio, uniqueness of the business model, proven management capability, and diversification into new but associated business areas; should ensure that the financial and business performance and growth should continue into the foreseeable future. At a PE of around 12 and PB of around 4 this could still become a wise investment idea.

A strong and robust potential multibagger!!  

DATAMATICS GLOBAL MULTIBAGGER POTENTIAL

Datamatics Global Services is a company founded by Dr. Lalit S. Kanodia, an indian IT industry pioneer with a Doctorate from MIT, USA. Datamatics helps large global companies in managing their end-to-end application life cycle and business processes. Their next generation solutions span Document management, Portal management, Publishing solutions, Data warehousing & analytics and several others. For more info check, http://www.datamatics.com

Datamatics client footprint is spread across all four major continents, Americas, Asia, Europe and Australia. The company is a trusted partner to many Fortune 500 companies and help them power their business process automation by creating next generation solutions.

PRESENT DAY NUMBERS
CMP on Day20 Aug2014: Rs 58.40       Market cap: 350 crores         BV: 59            FV: 5        
Revenue FY14: 733 cr (FY13 550 cr)     Net profit FY14: 48 cr (FY13 26 cr)  EPS: 8.2 (FY13: 4.4)
Debt: 80 cr (on consolidated basis)       Current assets and cash balances: 160 cr (approx)

BRIEF HISTORY
Datamatics was one of the early companies in the indian IT industry. The company was founded in the year 1975. This was the first indian IT company to win "International Asia Pacific Quality Award" in the services category in the year 2007. Over the last 2 - 3 decades the company has won several awards and recognition in areas such as Quality, Corporate governance, HR, Job creation, etc

PAST NUMBERS

The above results are for standalone accounts of the company)

The consolidated revenue numbers are much higher than the standalone the standalone accounts. Still I prefer to stick with standalone numbers . As can be seen from the balance sheet it has very little debt and the company has surplus funds invested in mutual funds. So on a net basis it can be considered as a debt free company. Revenue growth in the recent years has been subdued and company’s profits have averaged around Rs. 20+ crores. - Chart from Dec 2013. 

MULTIBAGGER POTENTIAL
1. Revenues of Datamatics grew by 24% in FY 2013; significantly higher than 10.2% growth of the overall industry
2. Remarkable achievement in the growth of the acquired company Cignex
3. Cignex revenues grew from 99 cr to 193 cr in the 2 years after acquisition
4. Datamatics has maintained an excellent and consistent profit growth during the last 4 years.
5. The company's reserves (excluding revaluation reserves) as per balance sheet increased from 268 cr in FY13 to 306 cr in FY14
6. Except for 2-3 years, the dividend payout ratio has been in the range of 40% over the last 10 years

INTERESTING INFO
1. Datamatics Global Services was voted as India's "Most respected software company in corporate governance" at the 5th Annual India leadership conclave & India affairs Business leadership awards.
2. The company has delivery centers in 7 cities; Ahmedabad, Mumbai, Nashik, Delhi, Bangalore, Chennai and Puducherry
3. The company has overseas subsidiaries in Germany, USA, UK, Australia, Switzerland, Mauritius and Singapore
4. The export revenue of the company is 86%
5. Prior to founding Datamatics in 1975, Dr. Kanodia was one of the persons instrumental in setting up TCS in 1967

MY TAKE
From an investment perspective, Datamatics ticks all the boxes. It is a fine IT company; superb track record, consistently profit making, excellent promoter pedigree, financially stable, wide range of clients, management execution capability and more than anything; deeply deeply undervalued.

A million rupee question? Why on earth is this stock available so cheap? Market cap of 350 cr.
This is a question to which I have no answer. Mr Market has missed out on this one(thus far).

A company with 700+ cr annual revenue, 48 cr net profit, current assets worth 160 cr, dividend paying; solid, stable and robust in every which way. I am reasonably sure that this stock cannot continue to be ignored for ever. This is a great time to buy, hold and sit tight. Bright and profitable future ahead. For the company and its stock holders.

This belongs to Warren Buffett philosophy: Great Quality business at a reasonable (read, rock bottom cheap) price. An inevitable potential multibagger!!

Cupid Ltd ( Good potential multibagger )

Cupid Ltd -

Innovation is one of the best weapon to change a company’s fortunes. You take a problem and solve it, uniquely, and you are done. One such pharma company is male and femalecondom manufacturer Cupid Ltd. that has relied on Innovation to come out of woods. Cupid, is a condom manufacturer and the only Female condom manufacturer in India with its unique design approved by UNFPA/WHO and FDA. Cupid is only the second company in the world whose female condom has been approved by WHO & UNFPA. Being the sole manufacturer (which it manufactures from its UNFPA / WHO approved sinnar factory) in india and second only in the world, the market opportunity is very big, especially from WHO which is reflected in the various orders the company has started receiving in last few months. What is exciting about this company is that it is continuously innovating its product line. Although it has been manufacturing male condoms for a long time, but, keeping its promise with innovation they have been tinkering that product and trying to improve on it. Their R&D efforts in this regards bore fruits and last year they were granted a patent for their uniquely shaped specialty male condom. Cupid offers various types of condoms such as Plain, Dotted, Multitextured, as well as its newly developed female condoms. Some of its brand names are Green-Love, Big-Dom, Hi-life,and Black Cobra.

Past Imperfect, Future perfect: The Company had been struggling with lumpy earnings profile. The reason was the R&D resources being put on these innovations and more importantly their over-reliance on Govt. of India for orders. With their Female Condoms getting WHO approval Cupid entered into a Long Term Agreement to supply Male and Female condoms to the UN Population Fund (UNFPA).
The Quantity and value of each consignment will vary from time to time as per UNFPA’s global procurement requirements. The orders have started flowing from different countries across the world like Africa, Denmark etc. Cupid also markets its products in Russia, Australia, Turkey, Nigeria, Jamaica, UK, and Italy. The margins on these orders are very good too (though a number cannot be put across as the margins are also dictated by the kind of packaging associated with the orders). Last year the company was expecting an order from Govt. of india (that did not materialize), which is expected to fructify in this year. This would also help in further topline growth. Cupid Female condoms have been approved by WHO-UNFPA in 2012 and by South African Bureau of standard (SABS) in July, 2013. Currently Cupid is selling this condom in Indonesia, Brazil, Mozambique, Ivory Coast, Netherland, South Africa and India. Cupid’s customers apart from WHO and Govt. of India include Cipla and DKT. Cupid is anticipating large volume orders from South Africa, Brazil , NACO (National Aids Control organization) and Ministry of Health, New Delhi during financial year 2014-2015. The Company’s products are well recognized in the market and are best in terms of quality and standards.

               Earlier, the company used to have debt of more than 7cr in 2009-10 and debt to equity of more than 1 but the company is now debt-free. The promoters have also increased their stake from 36.9% to 48.81% (and the pledge has reduced from 41% to 18%). As per my interaction with the company’s management (Most of the research presented here is the result of my interaction with the management), starting this FY, the company’s earning profile will improve significantly (With no capex planned for next two years) and most importantly would become more stable and predictable. As this happens company plans to start paying dividends too. Management was saying that earlier all their internal accruals were being used to repay debts and invest in R&D (and therefore, no dividends – even Chairman did not accept salary, good capital allocation). Now as they start reaping the benefits of it, the company would start rewarding shareholders too (the management acknowledged that whatever is good for minority shareholders is automatically good for the promoters – being the largest shareholders). As per the company’s management, this year the company will “easily” surpass its all time high turnover. More importantly the bottom-line would be great, thanks to its WHO orders. The Nov last year’s contract would be up for renewal in Oct and the value of that would be keenly watched (they expect it to be better than previous order). The management is noticing strongest ever order inflow in the history of the company. 

BSE : 530843 ; CMP : 18.67 ; FY15 and FY16 expected EPS : 8.5 & 10 ; Short term Target : 80 in 5-6 month. 

UPDATE: Please book 25% of your investment and let it sit cost free. ( cmp 77 )

Dear readers, im considering a buy of Cupid Ltd at around Rs. 23 per share and sharing the following the views with you all. Hope this is beneficial for you in analysing this stock:

Summary of Investment Logic :

Expected EPS of FY15 = 8.5 and FY 16 = Rs.10.
Company manufactres and sells Male and Female condoms.
Female condoms are the latest innovative product launch by Cupid Ltd and it is getting good orders for this product.
Recently company started getting orders from WHO and these orders are going to improve with times to come. More orders are expected in 4-6 weeks from WHO.
Main raw material rubber is showing decline in prices so raw material price decrease also will boost profit.
Company has significantly reduced its debts so that is going to further add to its margins and net profit.
Promoters have increased their shareholding which show confidence on the part of promoters.
At CMP of 28.67 it is trading at just a PE of 2.8 on FY 16 and 3.4 on FY15 expected EPS basis.
Target = 80 in 5-6 months on the basis of 8 PE on FY 16 expected EPS.
It is FMCG company and most FMCG companies trades at 25+ PE so attaining a PE of 8 on FY16 basis is very easy and very conservative estimate.
Very good brand names and distribution all over India and abroad.
Condoms are recession free, inflation risk free, non cyclical business. It needs stringent quality controls so less competition from unorganised segment.
Company is on the path of turnaround. So it may see strong re-rating.

Force Motors flying time? Multibagger

Force Motors Ltd. (Force Motors) is an automobile company specializing in
manufacture of MUV, LCV, SUV and Tractors. It also expertise’s in design,
development and manufacture of automotive components and aggregates. It has
technical collaboration with Daimler AG, Germany in respect of multi-purpose
vehicles. The company started its first commercial production in 1958 from
manufacturing location in Goregaon, Mumbai. While undergoing many transitions
over last five decades it always maintained high standards of technological
excellence and quality.



Key rationales for accumulating Force Motors:

1) Force Motors is a vertically integrated automotive company catering to niche
markets of Middle East, Asia, Latin America and Africa. It’s ever increasing
diversified product portfolio is developed on principles of engineering
expertise, utility, performance and value. Over the last five decades it has
collaborated with leading global automotive companies to develop in-house
expertise for design, development and manufacture of automobiles, their
sub-systems, components and aggregates.
2) On an average 80% of vehicles sold by Force Motors is in the category of
LCV, UV and SUV segment while tractors constitute around 15%. It’s most
popular vehicle is ‘Traveller’ which was originally designed and produced by
Mercedes Benz AG, Germany as ‘T1 Transporter’. It has been making small
but steady foray into small commercial vehicles segment under brand name
of ‘Trump 40’.

3) Force Motors has capacities in place to handle upturn in utility and
commercial vehicle demand on economy returning back to growth trajectory.
Last couple of years had been difficult for automobile industry particularly
for utility and commercial vehicle manufacturers. Macro-economic situation
has changed rapidly over last quarter. Eye catching pick up is noticed in
industrial and manufacturing activity. General sentiments have also improved
dramatically since new Government took charge. The company is well
positioned to handle growth of 15 to 20 percent for next three years.

4) The company has set up ‘Advanced Technology Centre’ at Akurdi for engine
and vehicle testing. It undertakes project work on design, development and
up gradation of engine configurations in various displacements and capacities.



5) Force Motors also manufactures Diesel Engines. To augment engine
manufacturing capacity it is setting up next generation engine manufacturing
and testing facility in Tamil Nadu, which is expected to be completed by
January 2015. According to management this new facility will be used for
supplying engines to a new global passenger car manufacturer in India.


6) Force Motors has been assembling the Mercedes Benz engines and axles
for all its C,E,S and M class cars and SUVs built in India. Its Pune facility is
used for assembling and testing of Mercedes Benz engines for the passenger
cars made in India.

7) Promoters have been aggressively hiking their stake in the company. In last
six months they have raised their stake twice. They acquired 6.30 lacs of shares
of the company on February 17, 2014 and again 4.20 lacs shares on 31st of
July’2014. The total holding of promoter group now stands at 59.72% of the
paid up capital up from 51.75% as on 16th of February’2014.

8) Force Motors stands on firm balance sheet. It is net debt free, sitting on
cash and cash equivalents of around Rs. 219 crores as on 31st March’2014.
Capacity expansions and setting up of new plants have been primarily funded
through internal accruals. The company is sitting on cash per share of around
Rs. 150.

9) Revenue grew at a CAGR of around 21% in last 5 years, despite strong
headwinds in commercial vehicle space. Last two quarters has seen aremarkable turnaround particularly on profitability margins. Q1FY15 saw sales
revenue rise by 8.30% y-o-y and PAT by 35.94% y-o-y. Operating margins which
was a grey area for Force Motors has improved due to better blended
realization, stable input costs and higher operational efficiency.

10) The stock is available cheap at P/BV of 0.60x (ttm basis) and P/E of 8.95x
(ttm basis) at cmp of Rs. 563. Benefits of capacity expansions leading to
operating leverage along with higher operational efficiency on back drop of
improving economy is likely to play out in next three years.
11) Assuming the company is able to sustain its growth momentum picked up
in last two quarters, we expect Force Motors to deliver over 20% revenue
growth in FY’15. Based on annualized PAT margin of 3.73% (same as in FY’14);
its FY’15 EPS works out to be Rs 70.70. Valuing the company at P/E multiple
of 10x for FY’15 which is at good discount to industry average the target
stock price comes at Rs 707.
I recommend buy and accumulate on ‘Force Motors’ for a target price of Rs 707 in the short. Long term target 2500.  ( Safe investors can book 50% once doubles at 1400 and leave it cost free in your portfolio )
YE March (Rs. Crores) REVENUE EBITDA PAT EBITDA % PAT % EPS (Rs.) P/E (x)
FY12A 2,089.38 125.44 824.33 6.00% 39.45% 625.61 0.90x
FY13A 2,016.37 97.52 14.28 4.84% 0.71% 10.84 51.93x
FY14A 2,081.56 156.65 77.69 7.53% 3.73% 58.97 9.54x