About the Company

Cupid is engaged in business of dealing, marketing and manufacture of rubber contraceptives and allied prophylactic products. It is the first company in the world to obtain Pre-qualification status from WHO/UNFPA for supply of both Male & Female condoms. It currently exports to more than 65 countries worldwide.


Financial Results & Highlights

Consolidated Financials (In Crs)
  Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 43.57 11.16 290.41% 42.94 1.47% 121.94 50.56 141.18%
PBT 13.12 2.63 398.86% 14.19 -7.54% 38.78 14.62 165.25%
PAT 10.21 2.03 402.96% 11.03 -7.43% 29.4 10.85 170.97%


Detailed Results

    1. The current quarter was phenomenal with revenue growth of 2.9 times YoY and profit growth of 4 times YoY.
    2. 9M performance of the company was good with revenues and profits rising 141% and 171% YoY respectively.
    3. The company’s total order book as of 31st December 2019 consists of Rs 160 Cr which includes Rs 88 Cr of confirmed orders and Rs 72 Cr in the pipeline.
    4. The EBITDA margin for Q3 rose 100 bps YoY to 32.5%.
    5. Geographical sales breakup was 88% in exports and 12% domestic.
    6. Product-wise revenue breakup is as follows:
      1. Male Condoms: 56%
      2. Female Condoms: 42%
      3. WBJ & Hand Sanitizers: 2%

Investor Conference Call Highlights

  1. The management has stated that the reason for raw material costs to go up and margins to go down QoQ is the shift in product mix towards more of male condoms.
  2. The management expects the product mix to improve in Q4 with higher ratio of female condom sales which should result in margin appreciation.
  3. The reason for increase in finance costs is that it includes the interest payment done for financing working capital in Brazil where working capital days in over 90 days.
  4. The company has 4 major types of international customers. They are:
    1. WHO & UNFPA (United Nations Population Fund)
    2. Large buyers floating tenders from countries like Brazil, South Africa, Tanzania & India.
    3. International NGOs.
    4. Private sector customers.
  5. The company received new orders of Rs 30 Cr in the quarter. Half of this amount is for male condoms while the other half is for female condoms. Both these orders have originated from South Africa.
  6. The company expects the floating of new orders from Brazil to be done in the upcoming April or May. The size of the last issued tender from Brazil was Rs 120 Cr.
  7. The company is also expecting a 3-year South African tender to be announced by Early March. The delivery for this tender should start by July and continue for 12 months.
  8. The volumes breakup of the expected new orders from South Africa is 1 billion male condoms/year and 40 million female condoms/year.
  9. The revenue expectations from the above mentioned 1 billion MCs is about Rs 200 Cr while the income from the 40 million FCs is expected to be around Rs 80 Cr.
  10. The management maintains its earlier guidance for top line growth of 15%+.
  11. In the current order book of Rs 160 Cr, Rs 78 Cr is from male condoms while Rs 82 Cr is from female condoms.
  12. The company has filed its application for female condoms with the USFDA and it expects a reply in Q1FY21. Sales to the US can start from H2FY21 at the earliest.
  13. The management mentioned that the opportunity size for the company in Uganda, Kenya and Nigeria each is almost 50% of the level of South Africa.
  14. The management has maintained that the company will pay off all of its working capital loans as soon as the receivables are gotten and the company should remain cash surplus by the end of Q4.
  15. Based on the current order book, the company should be doing Rs 40 Cr + sales for each of the next 3 quarters at least.
  16. The management has mentioned that the revenue generating potential for the company is heavily dependent on the demand for female condoms. This is because it is high margin product. The company can produce 200 million female condoms which can lead to sales of above Rs 400 Cr. But the management has stated that this situation is unlikely as demand for lower margin male condoms always outstrips demand for female condoms.
  17. The management has also mentioned that all of its capacity is interchangeable between male and female condoms.
  18. The realization per piece for male condoms is Rs 2 while for female condoms it is Rs 21.
  19. The management has stated that South America and Africa should remain the primary sources of demand in the future.
  20. The management has mentioned that the company provides condoms to few B2C sellers in India mainly due to lower margins as compared to exporting to B2C sellers in other countries.
  21. The company is still in the hunt for a permanent CEO and has not shortlisted anyone yet.
  22. The company was running at 99% capacity utilization in Q3.
  23. The maximum manufacturing capacity in a year for the company is 400 million male condoms and 52 million female condoms.
  24. The company does not aim to venture into the B2C space as the advertising and branding expenses are too prohibitive.
  25. The management has mentioned that the reason that the South African Government has delayed new orders is that previous orders from other sellers has not be fulfilled yet.
  26. The company has around Rs 47 Cr in cash and the board is considering issuing an interim dividend.
  27. The EBITDA margin profile for male condoms is 10-15% rising to 20% in special situations. This is mainly because of high competition in the industry and excess capacity. On the other hand, the competition in the female condoms space is limited to Female Health Company only, all of which leads to far better margins as compared to male condoms.
  28. The management has mentioned that the company is able to command much higher margins for its female condoms as compared to Female Health Company mainly due to inherent low cost advantages stemming from its unique design.
  29. The management is not concerned about model replication as it takes at least 2.5 to 3 years to complete all the regulatory evaluations required to register a new product in this space.
  30. The company does not have any plans to increase capacity as it had just completed a 40% capacity expansion in March ’19.
  31. The 3 WHO approved female condom manufacturers in the world are Female Health Company in USA, Cupid in India and Hindustan Latex in India. The overall market size for female condoms is around 80 to 100 million units a year.
  32. The female Health Company claims to have a capacity of 100 million FCs a year. Cupid has a capacity of 52 million FCs a year.
  33. Last year, the company accounted for 75% of FCs in Brazil and 35% of FCs in South Africa. The company also accounted for 20% of the male condom business in South Africa.
  34. The margin profile for male condoms is 10-15% while for female condoms it is 45-50%.
  35. The total market size for male condoms in the world is 30-35 billion units a year.
  36. The capacity in the Malaysian MC factory is around 4 billion units per year while the Chinese facility can do 2 billion units a year.
  37. The company has yet to enter the male condom space in Brazil and all of the orders from this country are for female condoms currently.
  38. The management has mentioned that the working capital days in Brazil was stretched in Q3 mainly due to the holiday period from 15th Dec to 15th Jan where the payment got delayed by a month.
  39. The company does all of its export sales in USD only.
  40. Although the company is not actively looking to enter the B2C space in India, it already has tie ups with Amazon and Flipkart to sell female condoms online.
  41. The management has stressed that the major reason for the demand for female condoms in Africa is the spread of HIV in sub Saharan countries.
  42. The company is looking get some feedback on its plans to set up a joint venture facility in South Africa to make female condoms with the Department of Health in South Africa. The response to this proposal is expected to be received by April 2020. The capex requirement for this JV should be around Rs 5 Cr.
  43. The management expects sales of $2 million to $5 million I the first year of sales in the US. The annual sales of Female Health Company in the US is around $20-25 million.

Analyst’s View

Cupid is a leading condom maker in India. It is also one of the only 3 WHO-approved female condom manufacturers in the world. It exports its products to over 66 countries around the world. The company has done well in the past one year to bag international orders and this trend has continued in the current quarter as well where it delivered YoY revenue growth of 2.9 times and profit growth of 4 times. The company seems to be well placed with a strong order book ensuring revenues of more than Rs 40 Cr each quarter for the next 3 quarters. It has also made some inroads into the USA market and expects to start selling its products from H2FY21 onwards. The only major reason for concern for the company is the long working capital cycle which stems from long shipping times and long payment cycles for tenders and orders from non-profit organizations. Nonetheless, given the company’s long history of innovation and expertise in this field and the consistently high sales growth, Cupid is a good small-cap stock to watch for.



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