I am relatively new to the company and this website so please excuse my queries if they seem stupid.
One major doubt I had was I have been looking to find the latest Annual Report (AR20) but i cant seem to find it anywhere and neither am I finding any new Investor presentations. THe website also seems to be down so if anyone has any update on this please let me know.
Another thing I have noticed is that rubber was at a 5 year low recently so the upcoming margins should be good but does anyone have any idea regarding the order book. Since the business is primarily B2B and govt tenders and contract manufacturing being a major part of the sales, the sales are quite unpredictable. The only source of info recently is management guidance from the conference calls.
If anyone has any other source of information then please let me know.
AS per my earlier concalls understanding management does do commodity / currency hedging. so lower rubber and lower rs should ideally bode well for them.
Sales and Profits took a 30-35% hit. This is as per guidance.
Working Capital situation is stable. I was actually expecting an increase in requirement. Pretty good, considering they’re dealing with Governments (Especially in this scenario, where everyone is cash-strapped).
Borrowings of 12 Crores is still present. The management has promised to pay this down within this FY. We can see the 19 Crore part-repayment in the Cashflow Statement.
Order backlog is not a big concern, it goes up and down. Today’s concall will make clear if the recent past profit runrate of 10 crores can be maintained or not going fwd. The management had raised expectations before covid with higher profitability trend.
Accordingly the company can be considered as a value buy or a value trap (exciting narrative, management with integrity, sound balance sheet but erratic topline bottom line growth).
Let’s not forget that covid is still around and impacting businesses.
As per my understanding from the previous concall the expectation was that Turnover for this FY would be in line with last year but based on H1 performance that doesnt seem feasible. Dividend also is cut from Rs.2 to Rs.1. Lets hope for clarity during the con-call…
The concall got cut off in the middle. At least, I was not able to hear anything after 25 minutes. So I waited and dropped off. If someone has the full recording, please do post the notes. In any case, I don’t think it was a very eventful discussion.
But I have to point that the question by Mittal Analytics (@ayushmit) was repeated at least 5 times before Mr. Garg understood the question correctly. Mr. Garg has done a lot for this business, but it is time to admit that he is getting old and needs more personal time and care. I sincerely hope most of the duties are delegated to his brother within the next year.
Revenue : 135-140 Cr
PAT : 30-35 Cr
Order book - 120 Cr (FC/MC ratio in order book 47 Cr / 73 Cr)
Expect orders from Brazil but the tone of management was not convincing - so better not to expect any major addition
Production at pre-covid level from sept - earlier problems were manpower / shipping
PAT projection for next 2 quarters is 20Cr - assuming everything goes smooth & no further hiccups from Covid
Q2 revenue was lower due to following reasons
Many governments have reduced budget
SA & Brazil currency is down - indicates that currency movement effects them significantly
Goods worth 18 Cr are in transit - it could have helped PAT with 2-4 Cr
Personally I was surprised when management explained that current status of financials of company have improved as
Receivable have reduced
Short term borrowing has reduced to 12 Cr from 31 Cr - plan to make it zero by end of Q4
Interest expense has reduced
Cash & cash equivalent has improved
We as investor understand these by various statements filled by company but don’t expect management talking such analysis in concall
Medical Devices/ Test Kit Business
Capex - 12 CR (as per earlier communication in Q1 concall)
New update as INVEX introduced as JV partner (having 10 year expertise in manufacturing & marketing of similar medical devices)
ELISA test detects and measures antibodies in blood
These diagnostic test kits will be used for detection and prevention of COVID- L9, Sars-2, Maleria, HlV, Dengue, TB etc
New medical device business setup will be ready by mid Feb / Mar and commercial sale will be starting Q1_FY22 - As per earlier concall, JV was not disclosed and commercialization was expected by end of Nov & even management had provided guidance for Q4 revenue / PAT from new business
Margin from new medical devices business : RT-PCR business has seen huge fall in margins but management has guided for 20% margin
Raw material : rubber price was Rs99/Kg in Sep and expected to increase by 10% in Q3 - it will have very little impact on margins
Dividend policy - would like to maintain 4rs dividend for year
AGM is scheduled on 22nd December at 12 noon - online links for participation will be notified
As @dineshssairam has mentioned that management couldn’t understand questions from participants even after repeated attempts, while question was clear to all other participants. I don’t wish to speculate and management should be given benefit of old age and technical problems but I personally have a view that management pretends to do so when they are not interested in answering queries and wants to avoid few questions. In case of cupid management, I appreciate their responses and willingness to listen even a minority retail share holder but at some level, I rate them rigid as they do listen but don’t take suggestions seriously… in past buyback suggestion was appreciated but they continued with utilizing the CFO in dividend distribution, CEO search is on for so long… seriously, if you are looking for a resource… you do get or close the position in few quarters.
Was unfortunately unable to attend the conference. Was any clarity achieved on:
Level of expected annual revenue from the Medical Devices/Kits business?
Why is it a 50:50 JV when Invex is contributing 1 cr. and Cupid is contributing up to 10 cr.? (Based on the official release as per Outcome of Board Meeting)
I feel every company has its positives and negatives and we should be ok with this negative given the good work done by Mr. Garg and the disabilities. Its remarkable what they have achieved.
As a founder/promoter its not easy to give reins to someone, also its not easy to find capable/dedicated people with the owner mindset.
But yes, I agree that there can be improvements. They should bring other team members to be on the call and handle some of the questions.
12 Crs Capex. 30 Crs in Revenues expected in FY22. Margins expected are 20%. Since Cupid’s share is 50% of Revenues, that would make it 3 Crs (30 * 0.5 * 0.2) in EBITDA. That’s pretty good for a 12 Crs Capex, assuming they can pull it off and Maintanence Capex is minimal.
Invex is the one with 10 years of Manufacturing experience in this space. Cupid has nothing to contribute except Capital.
I was wondering if Invex (http://www.invexhealth.com/) has any experience in manufacturing. Going by their website (which has little details available), seems they have marketing experience only. Even for medical devices, they have just displayed the images without any detail. The website doesn’t provide confidence to a new investor.
Contrary to disclosure of 10 years of experience in similar field by Cupid’s JV partner, Invex publishes “Founded in 2019” on their linkedIn.
The company doesn’t have info available for public but claims to have a product portfolio spread into various categories of Pharmaceutical, Cosmecutical, Nutraceutical, FMCG and OTC, Generics, Medical devices, Biologicals and Novel formulations. Invex has customers who ranks amongst top 10 Pharma companies in India. Our M&A advisory team focuses on identifying strategic fits for our clients and enabling them to grow their business through the inorganic route by making acquisitions that provide access to newer markets, better technologies and innovative products and result in creating shareholder value.
Can anyone from Mumbai help to validate physical presence, size of their facilities, employee base etc?
Thanks Dinesh, btw your contribution on this entire thread is appreciated!
Your answers raise more concerns.
Economics seem too good to be true, particularly given how crowded this space is - 6 cr. total return on a 12 cr. CAPEX is 50% ROIC, without levering.
The JV terms still don’t make sense from Cupid’s end - capital contribution of 10 cr. is not nothing. Also, inverting your economics - Invex will make 3 cr. annually from an investment of 1 cr.! I’d assume they would run to do this with 10 more partners.
Technical know-how can be employed for much cheaper, and the medical test kit business does not require rare technical knowledge.
Exactly my concern! Director on LinkedIn also only has marketing experience - not technical/manufacturing.
Have the JV terms been made public? If yes please share the details.
I don’t think Cupid is so naive as to invest majority capital and allow invex to partner with others to do the same thing while Cupid watches on.
I think at this point the modalities are a work in process. There’s enough space for good players in the proposed business and it is too premature to speculate on how well Cupid will fare in this segment. Usually good managements have better data than that available in public domain, I can say this out of years of work XP.
It’s good to scuttlebutt and exchange thoughts but I feel that it is practical to let the management play out and seek answers regularly, at least they’re responding to shareholders queries. It’ll be a long haul so execution is the key monitorable IMHO.
We don’t expect Cupid management to make everything public about this partnership due to competitive reasons.
At least for now let’s hope that the remaining quarters pan out well and that the new business is ROE accretive.
The Invex website says that they’re into manufacturing formulations and other strength is M&A. I liked the website and the content but I haven’t done a detailed study.
One less-discussed bit in Cupid I thought was innovation and going digital. Does anyone know if apart from online sales is there anything much happening on the digital front and innovation?
Second, I think it’s best to wait for the actual manufacturing to begin and then take a decision on whether it’s good or bad for the kind of capital that is being invested. It’s only a year away, after all.
From what I understand its not really jv… cupid will own all the hard assets and do manufacturing… where as invex will do marketing and sales… for which they get 50% share… you might think it’s free money for invex… but imagine if cupid had to do marketing and sales… it would involve huge capex on that front… it seems like a prudent move on cupid’s part to spend very little capital and generate decent sales… roc after all this will still be upwards of 25% plus whatever growth comes in coming years…
