Cupid has started selling it on ebay as well, and look at the prices on this e commerce site
http://www.ebay.in/itm/4-Pcs-Cupid-Female-Condoms-High-Quality-Safe-Best-Female-Condom-/131674100057?hash=item1ea8635159:g:zJEAAOSw3ydVqfz3
Hi @ayushmit , I saw on twitter that you are also following cupid female condoms as below.
https://twitter.com/CupidCondoms/with_replies
Are you also interested or invested in the story ? would be happy to know your thoughts.
Thanks
Please see page of Fy 2015 Annual report .
It mentions capacity as 500 million condoms
And Fy 15 sales are 1 million male condoms and 50,000 female condoms.
How did this translate to 45 Cr revenues ?
Is there a mistake in the annual report ? If not , they can scale up many fold without capex?
Are there any new developments that the market is factoring? The stock is hitting the 2nd lower circuit in 2 days… while the downfall is nothing significant or alarming, the ferocity of it is. Barely minutes after opening bell and the stock has hit the lower circuit.
The next trigger points for Cupid is launch of their new product and perhaps a huge order from Zimbabwe. I hope the market is not reacting to late news on these fronts.
Cupid is known to give sharp corrections on a regular basis. This is good for those holding for the long term as it scares away the weaker hands. The current correction could be partly attributable to the mgt saying on some business channel that current qtr could be marginally effected due to Christmas holidays. For me Cupid is at least a 3 year play or till such time that the current mgt runs the Co. Expect the EPS for 16-17 to be Rs. 20 on a conservative basis. The current correction in hind sight later could be seen as a decent adding opportunity.
Thanks Rajeev. And I agree… atleast personally for me, this dip proved to be beneficial as it gave the much needed opportunity to re-evaluate the whole story from the grass roots level and I ended up with stronger conviction than ever before. In my humble pinion, with every passing quarter the market sooner or later has to give Cupid “premium valuations” with such superior NIMs.
Any credible threat is many many quarters away and every order they win is going to be a significant milestone towards that premium valuations (as seen in Symphony and other high margin stocks)
Discl: I added more recently, with Cupid among my major holdings and hence can be biased
The EPS estimate for FY17 of Rs 20 seems to be too conservative for me.
In FY 16, Q3 EPS is expected to be around Rs 5-6, with PAT to be north of 5.5 Cr, as the full impact of SA order will be reflected in Q3 only, I expect sales fig to be around 17-18 Cr. This is also because Q3 will be have all time lowest rubber prices, boosting margins further, also there will be +ve impact of rupee depreciation. I get a sense that this co is going through its A lollapalooza effect ( source 20th Motilal wealth creation study )
{ “Lollapalooza effect” is a term popularized by Charlie Munger, partner of Warren Buffett in
Berkshire Hathaway. It stands for really big outcomes arising from multiple factors acting
together. We believe Mid-to-Mega is one such lollapalooza effect. Multiple factors – Size,
Quality, Growth, Longevity and Purchase Price – need to act together for a stock to raise its rank
from Mid to Mega. We believe applying the 6 steps mentioned in section 6.1 (page 24) is a good
starting point to increase the probability of the Mid-to-Mega lollapalooza.}
I believe Cupid is going through the similar multiple factors going together like
So, now it comes down to execution risk only by management. So, mkt may wait to see more evidences for the same.
So, Q3, Q4 being even better, my FY16 EPS estimate is close to Rs 18-19, and I estimate fy 17 to be min around Rs 25. So from FY17 basis it looks reasonably valued at only 15-16 times (PE). I guess if the co keeps on executing well, condom being recession proof business, it may be re rated for much higher multiples of 25-30.
Another coming trigger for Cupid is the upcoming IPO of Kamasutra, which will also help it get the valuations.
So, with such a strong tailwinds, I guess it a low risk scenario, although stock may be highly volatile due to illiquidity or some other factors. One needs to patient and be watchful how story unfolds
Disc : holding, views are biased.
Please see this link
FHC’s FC2 female condom is made of Nitrile Polymer while Cupid’s female condom is made of latex .
Does anyone have insight into whether this puts Cupid at a disadvantage ? Anyone with access to management has raised this question with them ?
I just had a long chat with a leading paediatrician and a world authority in HIV/AIDS based in Lusaka. In his role as a doctor, he has access to both pregnant women and young mothers. The female condom was introduced in Zambia 5 years ago and is available absolutely free from many Govt owned health clinics. Despite the above, the response has been very tepid in his words. He travels all over Africa in his other role as an HIV expert and he sees very low acceptance in other African countries too.
The reasons have been enumerated in the thread above which include awareness, education, availability and social acceptance by both the partners. Moreover, in almost all the cases the FC has to be subsidised either by the Govt. or by Global healthcare agencies.
He sees no reason why suddenly the scales will tip towards the usage of FC in place of either male condoms or no contraception at all.
We must acknowledge that this category of FC has existed for years but has not grown as fast as people were expecting. Why do we think that the usage will accelerate going forward?
We should be careful in not extrapolating the South African order to surmise that other countries in Africa will place equally big orders for Cupid FC. It is quite possible that Cupid succeeds in taking market share away from FHC for some of the upcoming tenders but the category as a whole in my opinion will not grow so rapidly.
Disc - Invested
Seen many posts on this, but has anyone actually used the products ?
That is an essential scuttlebutt missing from this thread.
Discl : not invested
Agree… an essential scuttlebutt missing from this thread. The reason being people are little hesitant to share this kind of product experience in public forum like these. The best bet would be going by sales numbers. Cupid FC is available locally… Does anyone have sales nos from Pharmacy or online stores like Flipkart? I feel education/awareness is missing and Cupid should run TV ad or some kind to make people aware of this category… Being first mover, they have the responsibility of educating the potential consumers…
i have lived in Africa for many years and understand the psyche of people and govt purchases well, the game here is that HIV programs have funding and that will be spent , people may / may not use them to begin with
two over period people also start using them as the idea gets percolated , disease anyway is widespread
in many countries esp in southern africa they have been able to bring down the hiv infection rates with female involvement n condom usage , now FC empowers the female herself , i am sure it will find acceptance
With the risk of being torn apart by fellow forum members who subscribe to the sensible and long term approach that this forum is for the ones who discusses the story and not price targets and numbers I go ahead with my below post. I too believe in this philosophy strongly, however, this post is to put some numbers to Cupid’s 2020 story just to understand/check if we are on the runway for a take off or on the wrong runway with an approaching touch down 
Conservative numbers:
I have referred to Annual report of FHC (USA based competitor) and google resources to arrive at some of the numbers and the rest are personal and so subjective conservative estimates.
Adding up -
FY 2020, revenues of 500 crore and net profit of 125 crore (assuming a combined NPM of 25% which is possible). No revenue from lubricant jelly etc are considered.
Valuations -
This is a subjective opinion but the below points should provide the clues to it which most of the members are aware anyway -
a) High RoE/RoCE
b) CAPEX light business model
c) Regular dividend payments (hopefully, Mr. Garg maintains this)
d) Free cash flow generation
e) Promoter integrity and Corporate governance
f) Maturing of Indian market for FCs by that time
g) Bull market in progress by that time, hopefully
A PE of 30 would give it the market capitalisation of 3750 crore and a PE of 40 makes it 5000 crore. Market capitalisation at PE of 50, 60 etc in left to your mathematics prowess. Now, what PE does Cupid deserve, what does history say about such companies (Female Health related - a P&G may be?) is left to you.
What factors have not been considered in the above academic exercise:
Rationale behind key assumptions -
Caveats:
Let me start with a disclaimer. I have not studied Cupid business in detail and am not invested. However, I have from time to time read the Cupid posts on VP (and some excellent done by VPers here) and found the most of the things about business and management very interesting and worth digging, but never actually dug it…thus missing a multibagger!
Coming to your specific post, I really feel that this kind of exercise, where we take 10,000 ft view of the business make some intelligent assumptions about key variables in business and arrive at what CAN happen to a business in longish term future, is indeed very helpful especially when one is betting on business for more than 5 year horizon. I myself have done this kind of excercise for companies like ENIL & MCX. However, i personally feel that after taking a 10,000 feet view, what has really helped me to remain grounded is few points below
Invert! Always look for what is implied in terms of growth rate/market size expansion etc for the base case scenario derived from.: So applying this,
current topline of Cupid is 50-60 odd crores in FY 16. Based on analysis above it may reach 400 Crores in FY 20 .This will mean 60-70% CAGR for 4 years. We all know business do face challenges from time to tome both external and internal, in that context, is this assumption conservative/realistic? With how much certainty we can predict 65% CAGR for 4 years?
Secondly, the assumption on market growth from 1350 Crore to 2700 Crore in 4 years implies 18% CAGR industry growth. Now threre are many industries which have been growing at this rate in India. but we are talking about global growth rate, right? Is it fair to assume this kind of growth rate? Secondly, FC is a product which is a very personal in nature and has many social traditions/taboos attached to it. Hence, it has to overcome those impediments as well. In this context, how realistic is to assume this kind of growth?
Do we really have benchmarks for 25% NPM assumption for similar products/industry? My understanding is that even very high quality FMCG companies with extremely strong brands, distribution, operational efficiency and large scale do not command 25% NPM. Let’s take HUL/P&G - which has 15% NPM. Then what makes us believe that Cupid will command more than 1.5 times their NPM? Typically, high NPM are supported by niche market which has smaller opportunity size and are mature and not growing too fast. However,here we are taking about a fast growing industry and a product that is not so niche-at least in terms of manufacturing.
Which factors can kill the whole hypothesis? I am sure, if we sit back and think in that direction objectively, eventually we will certainly find few risks that can kill the story. May be many of them have very low probability of occuring so we may document them as low probability event. But it always help to document them as they stay on back of our mind and when unanticipated things unfold, we can go back and reassess the probability of risks
However, good a business be, there are number of things that may not happen as expected or inspite of all factors playing out as expected, market may not be supportive in terms of overall environment/market trend. Hence, I personally feel that assigning more than 20-25 times to any story on future earning basis is very aggressive though the market eventually may assign much higher valuation to the business but that shall always be considered as windfall and not base case scenario.
I just thought to share my thought process for whatever it is worth.
Discl: Find the story interesting but not invested at the moment
Very nice writeup by @desaidhwanil
Agree with you that envisaging very over optimistic scenario about anything can be detrimental .
Incase of cupid we are very much unnecessarily over optimistic.Agree it has first mover advantage and capabilities and approval in some countries but it still has a long way to travel.
Such high margins will not remain sustainable in the long term because it will also attract competition and also it is not such a niche segment.
Need to see how much new order it can win in other countries ( particularly in Africans countries ).
In India I think it would be difficult to alter the general mindset ( not impossible but ya very difficult ) and it would require very large of awareness and publicity to generate market and acceptance.
I think we need to be very vigilant and see how the story builds up and unfolds.
But I strongly believe that it is a very big social changer segment and sometimes we need to see in the future for some great stories.
Disc: Invested in cupid
Firstly, superbly put reply. I was actually looking for some counter-arguments on my thesis and that’s exactly what I have got - better is the fact that counter arguments are very much balanced.
I looked at each point of yours and have some views but yet they are not completely derailing the story. Invert is a good way of looking at things. Even if I were to go wrong by 50%, I would be ok with the returns.
Generally speaking now,
Bharti airtel revenues for FY 2005 are 8000+ crores. At that point of time the usual thought process would have been how much further can it go in 5 years, even a doubling of revenues might look far stretched but the revenues for FY 2010 were 40000+ crores. 5 times. I’m sure the revenue growth from 2000-2005 would be much higher, I have not looked at them as that’s not the point I want to make. I’m aware of African entry and all that.
Now, I’m not equating Cupid with Bharti. I’m aware that they are entirely in different sectors and so have very different market dynamics. The point is, when something is at the cusp of change, some one hard working is at the helm, company’s interests and promoter interests are aligned and multitude of factors are helping the company, the revenue growth would happen at a faster pace than anticipated.
I have a right to go wrong as much as my prediction of India winning the 2015 world cup went wrong.
USA rose through the Industrial era, capitalism bloomed. India turned around form 1991 when we were staring at a default and India even mortgaged our gold to others for liquidity. Similarly, African nations should catch up with the developing world at some point and for that to happen the basic issue of “Health care”, of which Condoms are only one aspect needs to be worked by their respective governments now. Even many Indian companies are interested in doing business with Africa, such as Marico etc.
Again, superb reply @desaidhwanil which should help me while discovering other stories.
you are alluding to the lollapalooza effect as Charlie Munger referred. My 2 cents.
Disc: invested at lower levels
If you remember my post few months back, I was predicting a fall in Page industries stock around 14200 and to my luck the stock moved accordingly. May be this is called beginner’s luck. Ok, let me try my hand at Cupid’s chart?
Link to my Page post:
Cupid Chart:
Appreciate if any technical experts can provide their perspective.
If I remember right, you predicted that Page correction might take it all the way to10k odd. I am writing it from my cell without retreading back to your old page post. So, pardon if that was incorrect. Infact, I found merit in that and sold a good portion of my Page holding
(“It looks like Page is forming “Head and Shoulders” pattern in the weekly 5 year chart and if the chart plays out the targets could be around 10000 which is the difference between neck line and head top”)
@richdreamz I have a feeling that you are being too over optimistic about the growth of the company. 4-6 b usd market that FHC is referring to is the size of consumer market which is completely accounted for by male condoms…the target market of cupid is 500m usd which includes male and female both. FHC has just entered the consumer market in USA and I am not too sure if they will be that successful…it is difficult to forecast a market that does not exist…only time will tell…also for Cupid to enter the market they will need US FDA which is probably another year away.
As per an article I read recently, female condoms account for 1.5% of the total condoms traded globally. I find that a little surprising because 1.5% of 500m usd is 7.5m yet in 9 months FHC has done sales worth 25m (could be because of consumer market too) and cupid has done about 40 cr…I believe there is still no concrete data on the size of the market…
I feel there are too many unknown variables here and hence would advise caution with the projections.
What is the actual size of the market? What is the market cap of Cupid compared to the size of the market?
Look at the number of competitors that entered the male condom space and got WHO approvals (UNFPA_MLC Prequalified Factories.pdf (63.0 KB)). The reason why there are just two players right now in the female condom market is only because the market is just too small.
What is the guarantee that consumers will accept female condoms as a product?
DEFINE_ME
“Finally, will female condoms follow the trajectory of tampons or of menstrual cups? Globally, use of female condoms has remained disappointingly low: the product represents only 0·7% of total condoms distributed by donor countries in 2010. Are female condoms like tampons in North America and Europe, which languished largely unused for nearly 30 years before eventually becoming an enormously popular—perhaps indispensable—reproductive health product?10 Or are they more analogous to menstrual cups, which have been around for decades, but have been adopted by only a small subset of women, despite numerous design tweaks. Implementation research to understand and replicate the enthusiastic uptake among some female condom users is critical to gauge the amount of funding and effort that should be invested into the device’s development and promotion.”
Who handles the company after Mr.Om Garg?
When will they get the next order?
Does the company have marketing DNA to brand itself and enter the market? Will Indian market be receptive to this product?
How does one estimate the growth in the size of the market and the company?
Disc: Invested. Reevaluating my investment thesis
