Decent 3Q inline with 2Q. BTW shouldn’t 3Q have been slightly better than 2Q. And does anyone have any update on the latest order backlog. Any new large order prospects?
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Cupid has come out with Q3 2016 results.
- The results were good to OKish on an absolute basis.
- On relative basis of what results other companies have come up and the valuations they are trading at, Cupid results were far better.
- The results would put a floor under the Cupid stock because you now have fair degree of certainty that the results are now sustainable and predictable.
- I was anticipating a bit better revenues because of spill over of 1 month’s Q2 FY16 revenue of South African order.
- For companies such as Cupid, YoY comparison makes sense as they are seasonal in nature, for the same reason Page Industries is seasonal.
Now, coming to numbers,
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YoY, the revenue growth is 31%
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YoY, the profit growth is 49%
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NPMs are maintained at 26% plus
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FY16 could end up with an EPS of 15 and at current price of 370 the PE comes to about 24.5 which is OK for such high growth sustainable, dividend paying company with a host of positive surprises along the way particularly when you see subdued results the other companies are coming up with. No guess in stock price movement as market is irrational and highly sentimental
I hold Cupid.
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ya… result is not bad. I think it’s fairly valued now.
Imho, Cupid is a global duopoly/oligopoly with mere 400crore market cap and huge scale of opportunity. We are at the tipping point for female condoms as a product, as despite being around for 20 years, the product has only lately started picking up pace.
Cupid is anchoring on 1-2 big orders. e.g. RS Software had 1 single anchor customer- Visa. Stock rose from 60 to 600. Visa got churned, Stock is back to 70 kind.
Unless cupid gets more recurring revenue model with sustained order book, it will remain a concentrated risky bet.
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Valid point, Anupam
But, the advantage with Cupid is that the market size is big for Cupid ( unlike for RS software, where there werent too many clients of likes of Visa )
Secondly, its WHO and UNFPA approval is the real moat.
The orders can flow from any of the countries depending on UNFPA programme & the country’s internal FP programme.
Rgrds.
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Cupid is giving excellent entry points… still looks undervalued. Looks like the market is concerned about lack of new orders
For last few weeks in CNN, they are talking about Zika virus, which is spreading fast and is becoming a epidemic. It is transmitted through mosquito’s. It affects the baby’s mental growth in womb. Doctors are asking not to get pregnant until 2018. So that they can figure out some vaccine to eradicate the virus. Do you think this will have any impact on Cupid’s condom sales?
Disc: Not Invested.
FHCO has issued a press release today saying female condom is a good way to protect against pregnancy in zika virus affected areas.
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i heard on tv that it is also transmitted sexually.unconfirmed i need to confirm.initiating a position
At first thought, I thought linking Zika virus to Cupid sales as a freak thought. So much for my thoughts! The recent upsurge in news flow has what prompted me to write this post.
- The recent news flow suggests that national health agencies and governments are advising people to wear condoms after their travel if they travelled to Zika affected countries as a ‘precautionary’ measure though the spread of virus through sex is low. This is spread predominantly through mosquitoes.
- The advise refers to wear condoms for 28 days until any symptoms show up and in case symptoms show then 6 months (read the below article).
- More importantly, pregnant women to be more careful and indeed adversaries are given ‘NOT’ to get pregnant (Condoms are effective way to avoid pregnancy without side effects of pills).
- The condoms sales should see a ‘short term’ spike (both male as well as female). However, since the impact is on ‘future babies’, the push for female condoms should be more pronounced.
- In fact, this can be used as a strong proponent by PATH, UNFPA etc. to aggressively push female condoms usage worldwide.
- Karex Bhd too spiked today, of course after falling till yesterday but this might be due to the the news flow.
This might be another reason to use condoms and so uptick in condom related companies.
Unrelated maybe:
- FHCO released its results today and the stock is up about 17% as we speak. There was some insider buying as well to a small extent last month. (link below)
- As per @Ishank in the above post FHCO has issued a press release today on this, I have not got the link though.
FHCO Stock price:
Caution:
All said and done, whatever might be, the sales uptick due to this may be a short term one and only time can tell if there are any long term impact on the sector which is not possible to gauge at this stage as the world sees such scares every once in a while so you need to think and take a decision.
Sources:
http://www.emqtv.com/female-health-co-fhco-issues-quarterly-earnings-results/185753/
first sexually transmitted zika case reported in dallas texas.bloomberg .com
zika virus episode will promote the use of female condom and people who have not tried till now will try it .
so its good for the overall sector as at least some awareness will be created .
FHCO has already suppplied 40 milloiin female condoms out of 50 million tender it won from Brazil. Hence, another tender is expected soon. Cupid was L1 in the last tender and yet the tender went to fhco. Hoping Cupid has learnt from the last episode and may get at least part of this large tender this time. This is annual 50 million pieces of Female condom as against cupid’s capacity of 40 million peices.
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Yes, one more big order win and the stock will get re-rated. By the way, all seems to be quiet on the new product launch (lubricant). That is another trigger for the stock
Stock of Cupid on a free fall to below Rs.300 levels., from 52 week high of Rs. 507/-
Is there any adverse development or news., that we are missing ?
Yes it’s taking quite a pounding… at one point it was heading towards the -10% lower circuit. There doesn’t seem to be any news at the moment unless they have lost an order they were hugely banking on
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The thing that goes up very fast on hopes can also come down very fast on fears. I think that is what is happening with Cupid…!!
Discl: Not invested but tracking
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- Big order needs to get executed to reflect in revenue
- Pipeline for few more 10-20 cr + orders need to be in funnel
If these 2 criteria are not met in next 1-2 quarters, IMO, the stock will go much below 300 to a 15 PE level.
No comment on oligopoly/duopoly/moat as because the market size, market growth, voluntary acceptance by masses is still a question mark
Disc: invested but lack of future visibility
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A fellow Cupid investor who understands the business well had a detailed discussion with the mgt. recently. Below are the key takeaways:
The Company will continue to grow at 15-20% in the normal course. Another big order could change that, but there is no knowing when it will materialize, though the Co. has been receiving inquiries on a regular basis.
Enough capacity to grow and could expand at minimal cost so free cash flows will be good. He liked the idea of providing quarterly dividend and may start it with the March quarter. Margins are sustainable for next 2- 3 years as most tenders are fixed price tenders and rubber prices are benign.
Hindustan Latex has now developed a female condom design and are ready to send the same for approval. However, the mgt insisted that they have patents on their design which is far superior to the design that the PSU Hindustan Latex has come up with.
Retail presence is something they have explored but think that needs a lot of marketing expenditure. They are thinking about it but n decision yet.
He has not received any offer to sell the company. He said there is a price for everything and would consider it if the offer was good.
Dec quarter was affected due to holidays from 10th dec till year-end in Africa so there would be sales spillover in March quarted
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