Hello Guys,
It good to hear about acceptence of Cupid in Zimbabwe as it is very large market with annual demand of ~ 5mn pcs and if cupid get the order it will be very positive for the company.
Source for Annual Demand in Zimbabwe: http://zimbabwe.news24.com/Regional-News/R35bn-tender-was-not-condomwise-20151012-2
Competition: Currently, there are followings players in the industry:
- Female Health Company (FHC)- Market Leader with annual sales of ~62 mn pcs. Its cost of manufacturing is ~15 Rs and selling Price is 35 Rs. It will be difficult for the company to maintain this run rate from public orders due to competitive pricing of Cupid. Company sees the possibility of the same and has started focusing on direct sales in USA.
- Cupid: Company has just started its journey with large orders from Africa. It is available in around 30 countries as of now and is in process of registering in other countries (FHC has presence in 132 countries). As company evolve, it can eat market share of FHC as its selling price is ~24 (cost price is 4 Rs), which is much lower than FHC sales price. Its product is also getting very favorable response from the users as it is easy to use (very important & critical factor).
- Sanghai Dahua Medical Apparatus Company in China which is licensed by a NGO PATH based in USA: It manufactures O’Lavie brand. Its selling price is ~50 Rs and based on various survey its product is not easy to use. Thus, its not a threat, atleast in medium term.
- Tianjin CondomBao Medical Polyurethane Tech: Its brand is Phoenurse and is not a threat as it is in testing Phase.
Based on the above points i think, Cupid has very limited competition in the medium term and can get various orders going forwards due to favorable response for its product and cost advantage.
Valuation: As far as Valuations are concerned, its trading at ~25x FY16E and is not expensive looking at a) Growth Potential b) Moat (Cost Advantage) c) Oligopoly Industry d) High ROE and Dividend Yeild.
So as i mentioned few days back, patience to hold would be key here.
Note: Invested and Views could be biased.
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