Hope following clarifies the doubt
i think management have a lot of explaining to do in tomorrow’s con call as the SA JV was the main project and with that gone the whole equation changes completely. B2C is a long road with a lot of cash burn. I fail to understand what is the point of all this expansion if you don’t have orders to fill. Not sure whats next now.
I hope investor put lot of pressure on the management to appoint a new CEO and to do better business.
I kind of don’t like this idea at all. I’d prefer a level-headed CEO who knows what he/she is doing.
“Fresh young blood, dynamic” are precisely the exciting things CEOs shouldn’t have.
The current ceo is level headed and knows what he’s doing.
A dynamic ceo is needed to take things to a new level…Mukesh Ambani is a dynamic ceo.
Level headedness is a quality.
Cupid Q2FY19 Concall:
As per Earnings Release, Cupid has decided not to be an equity partner with J V partner.
The product mix for Q2FY19 (Female:Male:Lubricant) has changed to 50:50 from 60:36:4 which has clearly hurt the margins.
Tenders from SA Brazil India Tanzania Zambia
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SA 3 year contract is completed on 30th Sep.
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Expansion from 400 mn to 560 mn pcs. First line by Dec and second line by March. Expect to increase topline and reduce production cost.
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JV with South African local partner:
Will not be an equity partner. Instead, cupid will supply semi-finished goods and provide technical assistance in setting up and running a plant. 5% royalty payment. This is a better alternate and less riskier than being a minority partner. -
Cupid FC registered in Brazil and participated in 30 mn tender. Results expected by Dec.
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Participated in MC tender to supply 70 mn pcs to Govt of Tanzania. Results in next few days.
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Order book: Confirmed order of Rs.51 cr. MC-FC (2:1) to be despatched by Mar 2019. Expect to receive more orders in next 6 months. Capacity utilisation in quarter was over 90% for both MC and FC. Includes 15 Cr of SA govt.
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Large scale tenders are floated due to more funding from donors (WHO, World Bank). Additional capacities will help to participate and margins will be better.
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Positive for next 3-5 years.
QnA:
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SA JV:
Will be technical partner instead of equity partner. Expect Rs.4-5 Cr. p.a. revenue over next 3 years without any investment.
JV partner may be able to gain technical expertise and hence repeat order may not come.
Expect one more tender from SA. From JV govt expects to purchase 16 mn FC (Oct. 2019), 24mn in 2nd year, 32mn in 3rd year, 40 mn in 4th year.
Reason for low allocation in first tender as govt expects to give order to local JV partner. -
Brazil Tender details:
30 mn pcs. (FCF) - 30 cents / pcs. - 9 mn USD. This is for 1 year. Already talking about large qty for next year.
Expect it to be allotted to one party. -
CEO:
Had 2 prospects in last qtr. Could not negotiate salary with one. Second is overseas and not sure when will it materialise. -
Tanzania: 70 mn. Pcs MC Value - 16 Cr. - to be delivered in 4 months. Results to be out in next few days.
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Retail: Promoting brand through wholesales / dealers / distributors and digital marketing. Sale in H1 is less than 2 Cr. By March, expect sales to be Rs.4 Cr. by Mar 19. EBITDA margin ~25% on B2C sales. MRP for 3 pcs MC is Rs.25.
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USFDA:
Not received final notification from USFDA. Expect it by Dec. Initiated a contact with Marketing company in california to retail cupid condoms in US. Hoping to receive revenues from Q1FY20.
Retail price for FC in US is $1.5 - $2. Earlier they have marketed competitor’s product.
- Cupid will submit technical documents within 2 months
- Clinical trials - 2 months (possible that no trials required)
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Expect 20-30% revenue share from non-condom products in next 3-5 years.
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Targeting 10-15% increase in topline for next 3-5 years. Total production capacity has increased. Coming out with value added products. Cost of production will be lower.
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New products in pipeline - wipe to stop premature ejaculation. 2nd generation FC - attachment to condom for more pleasure.
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Other income represents exchange benefit.
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Raw Material prices: Currently enjoying lowest prices for latex. Silicon pricing - were suffering due to high costs. Prices have come down by ~ 25% in last 3 weeks. Looks favorable now.
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Guidance for FY19 - 90-95 Cr. Topline. ~20 Cr. PAT.
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thanks Hardik. Very good summary.
In terms of analysis, I think th skew ismore towards male condoms and female condoms are sort of struggling. The only positive I see is if the company wins the tender in brazil which is fairly large at $9 million. Given that its a 1 year order, $9 million translates to 63 crores so if Cupid wins this the stock could shoot up. the US FDA is the next major step and if Cupid can even manage to get a 10 - 15% share of the US market which is large as well as lucrative. Only issue is that this is at least a 12 - 18 month time frame. I don’t think revenues in April - June 2019 qtr is possible from the US market. Too tight.
In summary, the company is still dependent on tenders which is a binary event, so if people can stomach the uncertainty and lumpy nature of revenue then I think things could turn out positive in the next 24 months, but the risk is significant.
Yes, this year they may do 90 Cr. topline but contribution from MC will be more and hence margins will be depressed.
I was excited about Brazil tender until Mr.Garg mentioned that it may be allotted to one single company. It would be amazing if Cupid gets the entire order. But if they do not qualify as L1 then it would have been nice to get atleast a part of it. This tender is important.
I was also surprised on the timeline for US market. It looks too optimistic to start getting revenues from Q1FY20. Mr.Garg did not factor timeline for any qualification / re-trials by USFDA. Also, after the approval, the speed at which Cupid and US marketing company can make product available in retail is important.
Well,the Tanzanian order of 16 crs just got announced.
This should be of some consolation in the short term 
Some more key takeaways:
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The 51 crore order book mentioned is for FY19 only. That gives fair revenue visibility for 2019.
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They’re working on selling other products.
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Demand is robust out there.
This is good news. Given that this is required to be executed in 4 months, this should add to the already projected topline of Rs.51 Cr. for H2FY19.
Can u share the link of Tanzania order?
Where’s it mentioned that the order has to be executed over 4 months
I think this was mentioned on the concall.
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Thank you for the summary.
One vendor for the Brazilian order pretty much rules Cupid out. Most procurement teams would ask for at least 3-4x revenue of the order size and experience of handling a similar-sized order — Cupid doesn’t meet both these criteria. It’s topline (85cr) is not even 1.5x the order size (~65cr) and it has never managed an order of this size in a single year. Hard to expect any procurement team with a solid prequalification framework choosing a vendor like Cupid. Not to mention that this is a government order where prequalification is usually more stringent.
Female Health Company (FHC) / Veru is likely to pip others to the post if it is participating and if indeed the goal is to choose one vendor.
Cupid probably brings the low cost advantage to the table — something that did work with the SA order that just expired but nothing else that I can think of at this stage. Tough one to win.
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Please share source of information.
For your kind information, Cupid is the L1 bidder due to which Brazilian Govt extended time for cupid to submit remaining documents for pre-qualification. First order is small order and for which Cupid might be potential winner. Let’s hope for the best
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I don’t think the Tanzania order is included in the 51 cr. I checked with company secretary. TOtal order book post this new order is 67 cr.
Yes, that’s what I have mentioned.
“this should add to the already projected topline of Rs.51 Cr.”
Topline is likely to cross 100 cr for FY19.
The source of information is the call notes posted above.
Can you elaborate on “First order is small order and for which Cupid might be potential winner”? Also, how is Cupid L1 if the prequalification process is not yet complete? Bids follow the prequal process, not the other way around. What am I missing here? I was not on the call yesterday so will be great if you can address these points and/or any additional notes that you have from the call. Thank you.