CUPID - INDICATIONS OF UPMOVE

Jan 20, 2018

Technical details:
1) Stock has last week broken out of an one and half year downward channel with huge volumes and reached a high of around Rs 420.
2) In that process stock's 30 day ema has crossed 200 day ema.
3) CMP is around 345 meaning STOCK HAS CORRECTED FROM A HIGH OF 420 TO 345.
4) 4 HOUR CHART REVEALS HIDDEN BULLISH DIVERGENCE VIS-A-VIS STOCH 14,3,3 / RSI14 / MACD 12,26,9.
5) STOCH 14,3,3 BULLISH CROSSOVER OBSERVED AT OVERSOLD ZONE.
6) 4 AND 5 SIGNALS A POSSIBLE INDICATION OF COMPLETION OF RETRACEMENT.
7) POTENTIAL UPMOVE AHEAD.

Fundamental details:

Profitability:
1) Current RoE at 47%; Average 3 year RoE at 46.5%; Average 5 year RoE at 35%.
2) QoQ proit growth as on Sep 2017 at 37%.
3) Current quarter vs prev years same quarter profit growth as on sep 2017 at 11%.
4) Positive CFO and CFO annual growth as on Mar 2017 at 19%. CFO steadily growing (except Mar 2014) since 2009.

Leverage:
D/E at 0

Valuation:
1) P/E at 20
2) P/BV at 7
(An academic explanation to derive RoE from the above 2 metrics : E/P = 1/20; P/BV = 7; Hence E/P X P/BV = 1/20 X 7 = 7/20 = 35% )

Promoters:
1) Promoter holding 45%
2) No pledged shares.

Fundamental prospects :
1) Company's management has given a very promising outlook on the business conditions going forward.
2) Company has got an order worth Rs 25 crores from Govt of India, Department of health and the benefits expected to flow in the coming quarters.
3) Expansion of facilities by 20% planned which would bring additional revenues from Q1, 2019.
4) Company looking to participate in tenders for setting up a manufacturing unit in South Africa and also for exporting its products to South Africa.
5) Company plans to achieve 10 crores of sales (volume) in the next 3 years for which Company has started its brand promotion activity digitally.
6) Company has developed three new products as a result of its R&D and started its commercialisation from Dec 2017.

Sector:
Consumer Durables.

My View on the Company:
Technical View : Long bias; Conservative target of 500 plus with a stop of 300.