Stock rallied from 126 to 240 pre-result, now looks like post result correction started.
Let’s wait for the concall guidance for whole year and how the stock price behaves.
I noticed 12 cr borrowing despite sufficient cash balance.
I see similar amount in Fixed Deposit.
There is huge increase of approx 22 Cr in Trade receivables as well, which is approx 45 Cr.
I know that the company operates predominantly in Govt Orders & sometimes money gets released late due to various slow processes still I don’t like such a big figure for a company having ~100 Cr Topline.
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Excellent result. Due to govt tendering, money sometimes received late but not bad receivable.
Promotors are till date having honest behavior and share all information with shareholders. No hide and seek game!
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My observations from the results:
- Although Revenue doubled, Cost of Materials has reduced drastically. Need to understand why.
- Employee Expenses has increased considerably. Typically Employee costs won’t have a lot to do with Sales. So need to understand if Salaries were raised on purpose (Not saying that’s bad).
- ‘Other Expenses’ increased drastically. Did they spend on advertising or sales promotion again?
- Tax Rate cut has also helped the bottomline.
- ‘WIP Plant and Machinery’ went from 7 Lakhs to 137 Lakhs. Is this new Capex? I thought the expansion plan was nearly done.
- Trade Receivables nearly doubled, but that’s in line with Sales also doubling.
- Why has Current Borrowings increased? What is the need for raising Debt when we have Cash?
- Despite Profits doubling, OCF is lower than the comparable quarter. Mostly due to the spike Receivables.
- Investments have have been sold and Fixed Deposits increased. Why?
Let’s ask some of these in the concall. Hopefully, I will join as well.
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Still no news on new leader for the company. Dividend is very less.
Also, why was there so much rise pre results time but stock ended 6pct down today post results announcement? Pump and dump?
I personally didn’t feel comfortable holding this stock and exited in the rally. A fall post results was what I suspected and the stock has behaved similarly.
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1.37 Cr and not 137 cr. Employee expenses up by 20%, contract labour ?
The 12 Cr borrowing having 20 Cr in bank is the question.
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These could be short term loans to meet working capital taken with the intention not to break term deposits…
Are these necessitated due to growing trade receivables?
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If we compare it with previous quarter (Q1 as it has similar Geography Mix & Product Mix), Cost of material has increased from 25.24% vs 29.19% (excluding impact of change in inventory)
I assume that it consists of Promoter incentive, which is 2% of EBITDA.
The order book (including expected) has grown by from 163 Cr to 173 Cr.
Like others I am surprised by loan as they had enough cash, still FD is created & loan is taken in the same quarter?? any idea if they get loans on libor rates.
Why break our heads when the concall is just days away? So far, the management has been straight forward. There is no reason to doubt otherwise now. I am sure we will get most of our questions answered fully.
Con-call will be today only.
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Quite an informative call (As always) with Mr Garg. A few points I managed to jot down below:
- H2 top line around 80 cr;
- Receivables are higher because Brazil gov’t has 60 - 90 days time to pay. We have exposure of 31cr with Brazil although Garg believes this is non-credit risky;
- OB is heavily skewed towards FC (67%);
- EBITDA margin on MC is 15 - 20% and FC is 45% - 50%;
- SA JV is and wipes are progressing slowly which I imply as not going anywhere;
- Next big tender is the SA tender (end of November) followed by Brazil;
- Revenue for 2021 is also going to be healthy - 123 cr order book for which PO has been received, another 50 cr PO is pending so rough total is 173 cr of which 80cr will be in H2 2019 so will be left with 93 cr which is enough for H1 2021. By then hopefully additional small orders and SA + Brazil will come through.
- US venture would be around Jan -2021.
Any other points folks?
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I think most of these are very short term in nature. Not that that’s bad - we absolutely need to know this for order based Companies. But I was taken aback by the sheer number of repetitive questions on Order Book and Sales/EBITDA Targets in 1-2 years. Most of the participants were Equity Analysts, which makes it even more ironical.
My key take aways from the call:
- Cupid has 50%+ Market Share in the Global B2G Condoms business for FC. I can only assume that it’s pretty much the same for MC.
- The management will consider a buyback over Dividends (I’m happy that several people suggested this, including me)
- Only 2 major players are there - Cupid and Veru. The Chinese player has stopped producing Female Condoms. It will take about 25 Crs and 2 years of Quality Trails to get into this market (Entry Barrier). Surprised to know that HLL is also a competitor, but to a smaller extent I presume.
- Still no word on a new CEO. Currently, the COO and CFO will take over should Mr. Garg step down (Not that he’s considering it).
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Its exactly the reason why they are short term. Equity analysts are only worried about the next 6 months and any share price performance during 6 - 12 months. They don’t really care about anything > 12 months.
As per call… possible repeat order from govt tender: 120 cr from Brazil and 150 cr from South Africa. This gives visibility for 2021-22 revenue for Cupid
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“Possible” is a strong word. There’s going to be a tender for that amount. But we know how some tenders ended up.
The current Order Book is Rs. 123 Crores. Around Rs. 80 Crores will be dispatched in H2 (Does this include the Rs. 31 Crores in receivables from Brazil, can someone please confirm?) Thanks.
I think 31 cr is the money yet to be collected for the orders dispatched…while 80 cr will be the orders which will be dispatched for the second half… so those 2 are different… assuming the second half orders have a faster cash collection cycle the cash position of the company will be much stronger than even the current position.
Disc - invested
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Great. So then we will have Rs. 43 Crores left over for FY21. The new tenders totaling Rs. 270 Crores, a purchase order for Rs. 50 Crores and smaller orders from the UN are expected.
The order book as on 30th September is 173 Cr. It includes 123 Cr (PO received & company planning to despatch maximum by 31st Mar 2020) and 50 Cr (Company is L1 in tenders, other formalities completed but PO for despatch awaited). They expect that 80 Cr can be delivered during current FY. Next year starts with 93 Cr orders in hand (plus whatever new orders they may get in future).
The receivable may remain higher (around same levels) as Brazilian orders have payment terms of 60-90 days.
FC market is growing @9.5% . Currently Cupid has 52% in this segment.
Considering overall business, main competitor for Cupid is veru pharma (having 60-65% of total market share specially because they acquired FHC, which is in business for last 26 years), Cupid comes second with 30-35% of total pie. A Chinese player & HLL are other with minimal pie of our core area of operations.
Debt is 3 Cr, other than recent working capital loan, which was taken against Fixed deposit @3% per annum. Difference between interest rate received vs paid was reason behind load although company had enough cash balance.
JVs in south africa has not moved, management hinted that its due to south african govt regulations.
US business expenses will be 2 Cr in next 12 months & company may start getting impact in topline from Jan’2021.
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Concall Transcript
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