@suru27 : I tried to check data for the lubricant jelly but couldnt get it.
Will this website show the export data for this category too ?
According to management female condom sales was
1QFY17: Rs8.7crs
4QFY16: Rs9crs
According to Zauba shipment data
2QFY17 so far: 3.37crs for 1.4mn pieces
1QFY17: Rs10.67crs for 4.2mn pieces
4QFY16: Rs2.96crs for 1.4mn pieces
So either this is not the whole data or shipments in a quarter does not correspond to sales in that quarter IMHO. Views invited
1 Like
Cupid to list on NSE - September 16th
https://www.nseindia.com/products/content/equities/equities/eq_listings_all.htm
6 Likes
Nice news. Thanks for tracking this Aniket. Speaking of benefits, we would no longer be limited by circuit limits?
Not sure of exact circuit limitations, but the overhang of the past BSE saga will be history.
Its a nice sentiment / confidence booster.
Cupid closed 10% up today, when was the circuit limit revised?
1 Like
Long ago… It was mentioned in this forum as well.
1 Like
The management was on CNBC. He said they’ve launched lubricant jelly. Also said they’re expecting 20% growth this year.
3 Likes
Company seems to be sprucing up its website as it tries to get some foothold in B2C segment. See attached link from Cupid’s website
Notes from AGM held yesterday -
-
AGM held in a small pandal in the company premises. Felt like small family function. Hardly 10 shareholders attended the AGM. More employees than independent shareholders.
-
I was the only one to ask questions to Mr. Garg who answered all my questions patiently one by one.
-
Hiring of CEO - Search is on. Hoping to finalize in next 3 months.
-
Currently 100% capacity is utilized. Q2 looks to be good.
-
They are hoping to generate 10% of sales from water based lubricant jelly. They are doubling jelly sachet packing capacity from 4 Lacs per day to 8 Lacs per day.(seen new machine during shop tour) I am told each sachet selling price is around 1 Rs. Back the envelop calculations suggest 4 Lacs per day would bring in 12 Cr sales per year. So clearly they are seeing much bigger demand for this product.
-
All export sales in USD and unhedged, to take benefit of depreciating Rupee.
-
Asked about share buyback (as compared to dividend due to tax efficiency ) , Mr. Garg mentioned that it is on agenda of next board meeting.
-
They are confident of receiving UNFPA pre approval for Cupid II by Oct end.
-
Annual sales forecast for FY 2016-17 remains 73 Crores. When asked can it be considered slowdown (Additional sales FY 15 - 25 Cr, FY 16 - 17 Cr, FY 17 Est - 12 Cr), Mr. Garg mentioned that they launched female condoms in FY 15 so that gave them big jump in last 2 years. It is stabilizing now. Although they launched lubricant jelly this year, he was not ready to commit to higher sales just yet.
-
Contract manufacturing margin is 10-15%, lower than own brands.
-
When asked why he is not expanding if he is running at 100% capacity, Mr. Garg mentioned that he would like to wait to see real demand before committing further capex. Since most of machines were developed in-house, he feels he can add capacity in 6 months if required.
-
After AGM, few of the investors shown interest for shop tour. Mr Naidu - CTO, took us on plant tour. My observations from plant tour as below
- Space constraint - Plot size is small with no extra land for expansion. Factory was full, which is good news. Boxes, material lying in the walkway, finished goods waiting to be shipped seen everywhere due to 3 containers planned that day. Bad news -Bit worried as very less space for expansion. Mr. Naidu mentions they will go vertical, which is possible as their product is not heavy!
- From the condition of the building, I could say that Mr. Garg runs a tight ship there! Strong smell of Ammonia in male condom dipping section is an area for improvement for health and safety of workmen working in that area.
- Seen incremental investment like additional washers, lubricant jelly packing machine etc
- Lot of contract manufacturing work going on the in the factory for male condoms with brand names like “Masti”, “Zaroor” being packed.
Overall impression - Small profitable family run company with promoter involved in all sides of business running and running a tight ship. Promoter seems honest and transparent. One negative point - Mr. Durgesh Garg - Chief Operating Officer (who worked in company for 20 years) is told to be related to Mr. OP Garg. But it seems he is not in good books of Mr. OP Garg based on my side conversations with some employees there. COO was not seen in the forefront of any discussions, shop tour etc. and also not considered for the post of CEO (as Mr. OP Garg was looking for person from Marketing background). This brings possibility of “turf war” when new outside CEO comes in (when that happens). But I agree it is bit of speculative as Mr. OP Garg may handle it easily.
46 Likes
Your effort is so much worth of acknowledgement but from ur post and ur experience it seems there is hardly any room for growth so do yu feel for recent investors this has a long term compounding value.
- utilisation is 100%
- lubricant jelly is a small market with no moat, seems cant be a big addition to the revenue that cAn be generated from condoms.
- there is not much expansion looking on the cards maybe because of his age he wont be aggressive but thats a personal view.
Many thanks once again
Thanks @Marathondreams for taking the pain to visit Nashik and post the excerpts here. Question is - where is the upside from here? is substitution of MC with FC, only upside feasible now? if so, how much more can they do it? How scale-able is this go skyscraper move? will it not add safety concerns
?
Well, it would be anybody’s guess. But I think upside will come from grabbing more business from FHC for female condoms. They don’t think HLL is a competition due to quality issues and also its a PSU. Cupid’s strength is the fact that they are playing within their means. They seem to be very good in taking small idea and executing it in most effective way. As long as they remain in “sexual health” domain, I think they will do well. They may not be able to maintain the heady growth of last 2 years (I hope I would be wrong here:wink:) but I think they will be good compounder of 20%+ CAGR. Their challenges as per me are -
- Finding next gen leader who can take them forward (and managing smooth transition)
- Physical infrastructure will hit bottleneck in 1-2 years time (even if they go vertical) so they have to think about bigger land/building. Did not get chance to discuss this with Mr. Garg while I was there.
- Increasing their product basket in related areas of sexual health.
With their current skillsets, I would be wary if they think of any acquisitions…
@Marathondreams Thanks for all your efforts in attending AGM and posting here. These posts are really helpful with insights from a neutral investor instead of hearing it from a PR firm or a brokerage.
company numbers looks good but I think this is a one-trick-pony type story. they got a jackpot with FC order. Until then it was a below average company not able to do anything worthwhile. do you know if they supply FCs against purchase orders or they have a long term supply contract (with cancellation penalty) with their customers? What if the customers (NGOs) are just trying out FCs as yet another tool for their mission (whatever is that) and decide it’s not really working out as per their expectations after trying it for few years? that will be the end of the story of Cupid as MC business is not doing very well. I think Cupid shareholders are not pricing this possibility.
3 Likes
Mr. Garg came across as a hands on businessman. Looking at the investor friendly initiatives he has started last year (NSE listing, quarterly concall/presentations,attending all investor queries, more frequent appearance on business news channels etc), I think he is “ticking all the right boxes” to make his company more attractive to outside investors like PE firms as acquisition target. But we, minority shareholders, should not be complaining for that:slight_smile:
So I have no issues with him. But history of professionalizing family business (although a public ltd company) are replete with challenges. If not handled well, the politics and undercurrent can unsettle best of the companies. So that will be a big “watchout”.
1 Like
Hi Yogesh, I think they have long term contract with South African government and maybe few other agencies like UNFPA. For rest, it is as per order. But as you said, it could be early days of FC business (which could be good or bad depending on how the story develops).
But I guess these challenges are similar in many smaller companies. You always start small as a “one trick pony” . But how you develop business from there will separate “men form boys”. So watch this space 
This is where my concern is. On one side, developing this business requires someone with marketing skills. Mr. Garg looking at his age is probably not going to be a travelling salesman who will bring in orders. Product is not going to sell itself. Junior Garg is looking at manufacturing and is not in the good books of Senior Garg and probably not the one involved in bringing in the existing orders. They probably realized that current senior management is not capable of taking this business to the next level so they are looking for a CEO. How do we know this boy will even grow into a teenager let alone a man?
On the other side, this company is selling like a safe investment (PE of 20) protected from several business risks but I see it as having multiple single point of failure.
5 Likes
Thank you for the notes. Its really helpful.
In the Annual Report of Cupid it was mentioned that the capacity utilization was 64%. If they’re running at 100% we could see good growth going forward.
Also any idea what kind of margins would the lubricant jelly offer?