Ahead with proven strategy
Despite the recent strong performance, we believe that Opto Circuits’s stock is reasonably valued,
considering the significant growth potential of the business. Opto’s tested and proven strategy of
acquiring products and expanding its sales globally has the potential to maintain its high growth rate
for several years. We are building in sustainable high-teen growth rates in our projections, but see a
possibility of even faster growth, as Criticare and Eurocor products ramp up. Revenues from the
recently acquired Unetixs, not included in our projections, will provide further upside. We retain BUY
and raise our target price to Rs344 from Rs293.
Expanding geographies and product baskets: Early acquisitions of Mediaid and Palco Labs and more
recent acquisitions of Eurocor and Criticare underline Opto’s skill in growing through acquisitions and
geographical expansion. The medical-devices market encompasses a broad array of products, and we believe
Opto’s strategy will help it maintain high growth rates through product-basket expansion for several years.
Launching new products: New multi-parameter monitors from Criticare are increasing their penetration into
the European and emerging markets, apart from consolidating their position in the US market. Eurocor’s drugeluting
balloon and cobalt-chromium drug-eluting stents are finding increasing acceptance in these markets.
Valuations remain reasonable: At 13.7x FY12ii core earnings, Opto Circuits’s shares continue to be
attractively valued, in our view, even after their 26% rise in the past three months. Our price target of
Rs344 is 16x FY12ii core earnings.
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