IMHO, this looks a bit disappointing.
What I was expecting was an order for spanning atleast 3 years (similar to the last one in 2015).
Looks like the south african govt is “playing it safe” by restricting the order duration to much shorter durations
Also, the ratio of female/male condoms is more tilted towards male (thus implying lower margins going ahead).
More clarity is required from management on the exact reasons for this.
however, given that the stock is trading around 15 PE (TTM) , the valuations seem fair to me given better revenue visibility atleast for the coming year.
The margins should be lower this year I think, which should cap the upside for this stock .
Disclosure : Already invested around 260 levels, will wait for next six months to decide on future course of action.
Since the much awaited SA tender is out of the way, the next set of triggers I am eagerly awaiting are
: Any order win from other markets like brazil, indian government, other african countries
: Any impact of the reclassification of the female condom to a lower level
: Latest status on the CEO search (it has been ongoing for some time now ) , which is a bit a concern going ahead
: any news on their hand sanitizer product
: Last 2 quarters had declining revenues for their lubcricant segment. They had indicated it should get better going ahead. Waiting to see whether that improves.
: Predictability in revenues should help management focus back on any potential acquisitions( they had mentioned female hygiene domain as a possible target).
I believe this S.African order itself is a trigger for a couple of Upper Circuits.
Company already has confirmed orders worth 63crs + S.Africa’s 40cr = 103crs confirmed orders.
Reclassification of the female condom to a lower level means lower risk level, which would make the regulatory norms easier. any ease in regulator norms is a very big positive. Mr.Garg has already stated that reclassification would enable filing with US FDA with ease and enter a very big USA market.
Who has given the order worth 63 crores could not find it on bse ? Is it for this financial year only. Cupid has never crossed 100 cr in sales in the past
@sagar_amula : I think the 60+ crs confirmed order details was mentioned in the last quarter’s conference call by CEO.
@EthicalWealth : I am not sure discussing future price levels is allowed or not .
Anyway, for the PE to get re-rated to beyond 20 levels, the B2C aspect of the business has to pick (along with new product lines).
Lets hope that happens
Two additional tenders from Brazil and India on Male and Female condom
I think now good time again started for Cupid. Looking at strong balance sheet and honest promoter/management…there could be announcement of Bonus shares as this year is Silver Jubilee Year for Cupid…Let’s enjoy up ride!
As I am new to the forum, I also don’t know whether there are restrictions to discuss the future price levels in the forum. If some senior members could clarify the same, it would be fine. Thanks.
I think the restriction is that any technical or price call should be backed by a fundamental analysis of the business, a news related to the business or some sort of Valuation/Financial Analysis.
Comments like “Buy and forget, long term target 1000” are better handled by sites like Moneycontrol. As the forum’s motto says, we’re the wheat, not the chaff.
A back-of-the-envelope calculation shows that the female condom order is lower than what Cupid and Mr. Garg were expecting. The INR 16.29 crore order translates to roughly USD 2.3 million. I recall the management saying that the per piece realization on female condoms is USD 0.3-0.34. So, it seems that we are talking about ~7 million female condom pieces for Cupid. Mr. Garg had mentioned that he was expecting 25-30 million pieces out of the total of 80 million up for tender, spread over a three year period. That translates to 8-10 million pieces a year.
Pending more color from the management, it is safe to assume one of the following has happened:
The volume allocated to Cupid is lower than expected and other competitors have got more.
If the volume is 8-10 million, then the realization per piece is lower, which will hurt margin.
The SA govt may be looking at increasing volumes in the future and it might be too simplistic to assume a one third division every year – this is a possibility since there has been a lot of political noise around this tender in SA.
This order, I am hoping, is separate from the 20 million pieces that Cupid is expecting from the SA JV.
On the male condom side, I do not recall the per unit realization but do remember that Cupid expected 100 million of the total 600 million up for tender. Does anyone have the per unit realization for male condoms?
Agree! Mr Garg was in last concall elaborating total revenue of 55 Cr from Female condoms alone, giving breakup as 40 Cr from SA order and 15 Cr from UN agencies and an NGO. Margins on Female v/s Male condoms is 40% vs 15%. This tender is disappointing, just inflating the topline. It is just 40% of what was expected.
Find the screen shot of Mr. Om Prakash on downgrade of FC to class - II. Its a very big ease in regulatory norms to enter into USA market. And Garg says in next 6 to 8 months it will complete the filings into US FDA. Are these not positive trigger??? Obviously it is. For any investor who invests based on future prospects, downgrade to classII is a fantastic news…
I agree that the tender value looks on the small side but we need to look at it from the total tender value. Can someone post what the overall tender allocation was? It is possible that the total tender value was 80 cr and Cupid got 40 cr of this. In that case this would probably be good news as Cupid got a higher share of allocation. Many thanks!
It dosen’t matter, really. It may even get completed in 12 months. no issues. Crux of the matter is that the reclassification to Class-II permits and eases the filings to US FDA. Its such a wonderful news that CUPID’s FC can enter into US market now or later… US is in the peak of culture where Female Condoms would get accepted very easily. Its not like India or Africa where practically ladies buying and accepting FC is very very hard.
If the crux of the matter is missed and just keep complaining for the sake of, I think, one would miss the great opportunity ahead.
One more important aspect never to be ignored is that If Female Condoms are getting filed into FDA, the company becomes more attractive for domestic/international acquirers too, in case Mr.Garg wishes to sell his company owing to his old age and no successors. This filing itself would increase the valuation of the company. If such scenario occurs and a reputed contraceptive company acquires CUPID in future, then nothing can stop it from becoming a multi-bagger too…
No successor to Mr.Garg is infact a blessing in disguise and increases the probability of a MNC acquiring the company in the future.
It feels good to dream about rosy and desirable outcomes. The price eventually ends up showing the mirror. In my opinion, nothing fundamental has changed yet to dream or re rate. Scalability is the key to “sustaining” a price movement.
