Cupid Ltd. manufactures condoms, both male & female from its manufacturing facility in Nashik. I first wrote about it on Vivek Gautam’s thread on September 14, 2014, that I reproduce below:
“Cupid to me seems quite an interesting bet as the focus has clearly shifted from low margin Govt. supplies to exports, where the margins are much better. The last 2 quarters already reflect this change. The products are approved by bodies like USFDA & WHO, so quality is not an issue. The Co. has recently introduced female condoms. It is only the second Co. worldwide to manufacture this & could be a potential game changer. This near debt free Co. is sitting on large export orders for both female & male condoms. Based on the last 2 qtrs, the Co. could do Sales, EBIT & PAT of about 40Crs, 8Crs. & 6Crs. for 2014-15, giving an EPS of about 5.3 for the full year. This would result in more than acceptable return ratios. Have recently invested in the Co. after Q1 results.”
The results for 2014-15 have beaten estimates: Sales, EBIT & PAT have come in at 45.14Crs, 11.7Crs, & 7.71Crs. That’s after taxes amounting to 3.72Crs have been accounted for @ 32.6%. A total dividend of 15% for the year has been paid / announced. The ROCE is a healthy 49.66% if one considers the average capital employed for the year.
Even though there are more than 200 Condom manufacturers in the country, Cupid continues to be the only one approved by bodies like USFDA & WHO.
I first spoke with the mgt. sometime around the end of September 2014. Had prepared a brief note then that I reproduce below:
“Had a pretty extensive discussion with the CMD. He seems pretty confident. Sees a 20-25% growth for the next 3 years going forward. I asked him about the possibility of orders drying up going forward. He said on the contrary, he sees the order flow increasing from exports. In addition, the Govt. is planning to float a huge tender shortly & he hopes to get a sizable quantity. The Govt. supplies have an even higher margin, contrary to my earlier impression. Maiden dividend was on his mind. He did not rule out an interim dividend as well. The pledged shares is a bit of a legacy issue, was originally against the term loan, since repaid. Now, it is against working capital limits. Plans to get them released before the end of the current FY. On the possibility of selling out, said that is always a possibility if the offer was good enough, but the minority share holders would only benefit if it were to happen. The focus was not on local branding, but on exports & Govt. supplies as & when the opportunity came. India was in a sweet spot. Chinese quality was suspect. Labour costs in Malaysia were now higher. Competition if at all was coming from Thailand. He is open to meeting us any time at the plant or in Mumbai.”
I finally met up with the mgt sometime around the end of December 2014 & prepared the following note:
“Met up with the CMD of Cupid earlier this week. The key takeaways were:
1. The Co. should do about 40 Crs this year. The current margins are sustainable.
2. The Co. hopes to double turnover in 2-3 years to 80 Crs, as the international market is huge.
3. No plans of creating a mega brand for the next 2-3 years for the Indian market, as it is a very expensive proposition & margins are slim. Will reconsider once the Co. reaches 80-100 Crs.
4. Dividend is on his mind this year, but was non committal.
It was a pretty humbling experience on the whole. The guy himself is somewhat blind & sees the world through the eyes of his wife who is constantly by his side. I asked him that despite living comfortably in USA / Canada for the last 30 years, what could possibly be the reason for him for running around the world working like this. He himself seemed pretty cool about his handicap. Said Cupid was his baby n wanted to see it grow.”
The stock may have gone up 3 times since September 2014, but I think the story has just begun. Besides Condoms, the Co. is also into Gels & looking to add other accessories where the opportunity is large. Here’s a link to a recent article that appeared in Outlook Business which throws some light on the size of the opportunity. Cupid already has a Webstore.
Disc: I am invested in Cupid Ltd., & continue to add.