Cupid Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from Cupid Limited (CUPID) Q3 FY22 Earnings Concall

Management Update:

• CUPID stated that the top and bottom line performance during 3Q22 were severely impacted by almost the negligible quantity of female contraceptive orders from both South Africa and Brazil. Also impacting the results were high input costs, including transportation and the increase in the sea freight cost due to shortage of containers.

• CUPID received an order worth about INR100 crore per year for 3 years extending up to Jan. 2025 to supply male and female contraceptive from the government of South Africa.

• CUPID hopes to complete FY22 with a top line of about INR27 crore. And the current order book stands at about INR141 crore, most of which CUPID plans to dispatch during FY22 and FY23.

Q&A Highlights:

• Vaibhav Badjatya of HNI Investment asked about the IVD business and the partnership with Invex Health, if it will only help to add value in marketing and distribution front. Omprakash Garg MD replied that the original understanding was exactly as described. However, based on CUPID’s experience so far, the company has decided to terminate this agreement as the company believes that it can obtain the marketing services from other means instead of sharing the 50% profit from the IVD project.

• Vaibhav Badjatya of HNI Investment also asked about the USFDA approval for female contraceptive in the U.S. and if the trial results are out. Omprakash Garg MD answered that results have been delayed by at least 3 months due to the COVID situation, the infection in South Africa were quite severe and lot of the participants could not continue to participate in this survey. So now, the results from the clinical study, is expected by end of March.

• Keshav Garg from CCIPL asked that in the order book of INR141 crore, the INR100 crore South African order per annum is included or excluded. Omprakash Garg MD replied that the INR141 crore includes the INR100 crore South African order.

• Keshav Garg from CCIPL also asked if the company expects some loss from the IVD business in the first year of operation. Omprakash Garg MD said that the company doesn’t expect any significant losses from the IVD operation because besides the capex the operating cost is minimal. And at the start of the commercial production in April, CUPID hopes to at least break even in the operations.

• Keshav Garg from CCIPL enquired about the net cash on the balance sheet and the capex in the IVD division. Omprakash Garg MD replied the company has INR72 crores, including mutual funds and FDs and bank balance. On capex, the company said it has spent already about INR8 crore and maximum would be another INR2 crore; mostly done with the capex already.

• Samrath Berry asked if the company is on track on the revenue projection for FY23 of about INR170 crores, INR180 crores with a profit after tax of minimum 20%. Omprakash Garg MD replied that now CUPID’s new projection for FY23 is top line of about INR170 crore and a bottom line margin of at least INR20 crore.

• Jayesh Kulkarni enquired about what capacities is the company working on presently and with the INR100 crores, what will be the capacity utilization. Omprakash Garg MD answered that right now, because of the increased orders for male contraceptives, CUPID is working at 98% capacity utilization during this Oct. to Dec. quarter. And expect to run at the same rate, 98-100% throughout next year.

• Yogansh Jeswani from Mittal Investments asked about the expected order pipeline for IVD business and what kind of working capital CUPID thinks will be needed. Omprakash Garg MD said the company doesn’t have a precise estimate for the amount of orders expected in the coming year. CUPID will be coming out with about 8 or 9 products during the entire next year. Depending on the world market, especially the export markets, CUPID is expecting gradually improving top line in the second, third and fourth quarters.

• Navin Jain asked how the raw material price and the margins are looking like for the supplies in this quarter. Omprakash Garg MD said that bulk of the INR40 crore sales, the company is expecting in 4Q22 will be from male contraceptive where the margins are 10-15%, due to high input cost. The margins in lubricants of about INR12 crore worth is higher at 30-40%. Overall since there are no female contraceptive dispatches during the quarter, the overall performance in 4Q22 will be limited.

• Navin Jain asked about raw material cost projections. Omprakash Garg MD said that the main raw material for CUPID is the price of latex rubber and during 3Q22 it has stabilized at INR149 per kg. The other input cost is the price of silicone oil that increased up to three times six months ago, which is also now coming down. Therefore, CUPID expects that during 4Q22 and beyond the production cost will be much improved compared to 2Q22 and 3Q22.