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Opto Circuits -Healthy show…
Opto Circuits’ results are not comparable as it acquired US-based
Cardiac Science in December 2010. Net sales increased 63% YoY to |
417.8 crore compared to our expectation of | 378 crore. This was mainly
due to the execution of a big tender order by Cardiac Science during
December 2010. Excluding sales from Cardiac Science, sales increased
37% to | 353.8 crore. EBITDA margins declined ~490 bps YoY to 29.4%
on account of consolidation of Cardiac numbers. Net profit grew 46% to
| 95.9 crore. Cardiac Science is currently incurring losses with an annual
turnover of ~| 630 crore. With drastic cost cutting measures at Cardiac,
the company expects a turnaround by FY12. We maintain our BUY
rating on the stock.
ƒ Highlights of quarter
Eurocor GmbH (another subsidiary) launched the second generation
percutaneous transluminal angioplasty (PTA) balloon technology,
FREEWAY. It received Congormite European approvals for coronary bare
metal stent brands eMagic and eFlex and DCGI approval for drug coated
stent delivery balloon MAGICAL. Cardiac Science registered sales of | 64
crore and net profit of | 2.25 crore for December 2010.
Valuation
With the acquisition of Cardiac Science, the company has further
consolidated its non-invasive segment by filling portfolio gap of AEDs,
ECGs, Holters etc. The global non-invasive devices segment (which
accounts for 72% of the company’s sales) is slated to grow at a CAGR of
~25-30% during 2010-15 on account of robust demand for patient
monitors and accessories. On the other hand, we also expect the
invasive segment to grow ~20-25% per annum on the back of new
product launches by Eurocor. Overall, we expect Opto’s sales, EBITDA
and PAT to grow at a CAGR of 45%, 22% and 24%, respectively,
between FY10-12E. We have downgraded the multiple from 16x to 14x
due to contingency associated with Cardiac’s profitability and also on
account of two recalls of AEDs by Cardiac Science due to safety issues
raised by USFDA. Even then, there will be substantial headroom after
the recent correction in the stock. We have arrived at a target price of |
307 based on 14x FY12E EPS of | 21.9
Result Analysis
ƒ Net sales up 63%
Opto Circuits’ results are not comparable as it acquired US-based Cardiac
Science (CSC) during the quarter. This quarter’s sales include one month
sales and profits of Cardiac Science.
Net sales increased 63% YoY to | 417.8 crore compared to our
expectation of | 378 crore. Due to execution of a big tender order by
Cardiac Science during December 2010, its sales ballooned to | 64 crore
as against the normal run rate of | 40-44 crore. Excluding sales from
Cardiac Science, sales increased by 37% to | 353.8 crore. This was
mainly on the back of new product launches by its subsidiary Criticare
Systems and Eurocor.
Its subsidiary Criticare Systems (CSI) launched next generation CO2/N2O
module, which is a compact version of Poet series CO2 detection
technology. This is used to measure inspired and expired CO2 and N2O
gases.
Cardiac Science added two ECGs under its Burdick brand, known for its
accuracy, reliability, and ease of use. The ECGs, available only in the US
deliver built-in, bi-directional communication so customers can connect
to leading EMRs.
During the quarter, another subsidiary Eurocor GmbH globally launched
second generation percutaneous transluminal angioplasty (PTA) balloon
technology, FREEWAY. This technology is used for the treatment of
critical limb ischemia. It received Congormite European approvals for
coronary bare metal stent brands eMagic and eFlex and DCGI approval
for drug coated stent delivery balloon MAGICAL.
ƒ EBITDA margins decline by 490 bps
EBITDA margins declined by ~ 490 bps YoY to 29.4% on account of
consolidation of Cardiac Science, which is incurring losses at the EBITDA
level. Employee cost steeply increased by ~310 bps (as percentage of
sales) due to addition of new employees at the Malaysian SEZ and
consolidation of Cardiac Science employees. EBITDA in value term
increased by 39% to | 123 crore.
ƒ Net profit up by 46%
OCL’s net profit rose 46% YoY to | 95.9 crore mainly on account of an
improved performance of the base business and also on the back of other
income of | 10.46 crore (loss of | 6.1 crore in Q3FY10). This was driven
by forex gain and the royalties received by EU and US subsidiaries.
Cardiac Science acquisition
Opto Circuit acquired US-based Cardiac Sciences in December 2010 for
US$85 million. The acquisition was funded through debt (US$55 million)
and internal accruals. Cardiac Science develops, manufactures and
markets advanced diagnostic and therapeutic cardiology devices and
systems. CSC is a loss making company with annual sales of around US$
140 million. During December 2010, CSC registered sales of | 64 crore
and net profit of | 2.3 crore. OCL clocked higher sales and marginal profit
due to execution of a big tender order during the month. The company
expects CSC to break even at the EBITDA level from Q2FY12.
Valuation
With the acquisition of Cardiac Science, the company has further
consolidated its non-invasive segment by filling the portfolio gap of
automated external defibrillators (AEDs), electrocardiograph (ECGs),
holters, etc. The global non-invasive devices segment (which accounts for
72% of the company’s sales) is slated to grow at a CAGR of ~25-30%
during 2010-15 on account of robust demand for patient monitors and
accessories. On the other hand, we also expect the invasive segment to
grow ~20-25% on the back of new product launches by Eurocor. Overall,
we expect Opto’s sales, EBITDA and PAT to grow at a CAGR of 45%, 22%
and 24%, respectively, between FY10 and FY12E. We have downgraded
the multiple from 16x to 14x on account of contingency associated with
Cardiac’s profitability and also on account of two recalls of AEDs by
Cardiac Science due to safety issues raised by USFDA. Even then, there
will be substantial headroom after the recent correction in the stock. Our
target price is | 307 based on 14x FY12E EPS of | 21.9.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Opto Circuits -Healthy show…
Opto Circuits’ results are not comparable as it acquired US-based
Cardiac Science in December 2010. Net sales increased 63% YoY to |
417.8 crore compared to our expectation of | 378 crore. This was mainly
due to the execution of a big tender order by Cardiac Science during
December 2010. Excluding sales from Cardiac Science, sales increased
37% to | 353.8 crore. EBITDA margins declined ~490 bps YoY to 29.4%
on account of consolidation of Cardiac numbers. Net profit grew 46% to
| 95.9 crore. Cardiac Science is currently incurring losses with an annual
turnover of ~| 630 crore. With drastic cost cutting measures at Cardiac,
the company expects a turnaround by FY12. We maintain our BUY
rating on the stock.
ƒ Highlights of quarter
Eurocor GmbH (another subsidiary) launched the second generation
percutaneous transluminal angioplasty (PTA) balloon technology,
FREEWAY. It received Congormite European approvals for coronary bare
metal stent brands eMagic and eFlex and DCGI approval for drug coated
stent delivery balloon MAGICAL. Cardiac Science registered sales of | 64
crore and net profit of | 2.25 crore for December 2010.
Valuation
With the acquisition of Cardiac Science, the company has further
consolidated its non-invasive segment by filling portfolio gap of AEDs,
ECGs, Holters etc. The global non-invasive devices segment (which
accounts for 72% of the company’s sales) is slated to grow at a CAGR of
~25-30% during 2010-15 on account of robust demand for patient
monitors and accessories. On the other hand, we also expect the
invasive segment to grow ~20-25% per annum on the back of new
product launches by Eurocor. Overall, we expect Opto’s sales, EBITDA
and PAT to grow at a CAGR of 45%, 22% and 24%, respectively,
between FY10-12E. We have downgraded the multiple from 16x to 14x
due to contingency associated with Cardiac’s profitability and also on
account of two recalls of AEDs by Cardiac Science due to safety issues
raised by USFDA. Even then, there will be substantial headroom after
the recent correction in the stock. We have arrived at a target price of |
307 based on 14x FY12E EPS of | 21.9
Result Analysis
ƒ Net sales up 63%
Opto Circuits’ results are not comparable as it acquired US-based Cardiac
Science (CSC) during the quarter. This quarter’s sales include one month
sales and profits of Cardiac Science.
Net sales increased 63% YoY to | 417.8 crore compared to our
expectation of | 378 crore. Due to execution of a big tender order by
Cardiac Science during December 2010, its sales ballooned to | 64 crore
as against the normal run rate of | 40-44 crore. Excluding sales from
Cardiac Science, sales increased by 37% to | 353.8 crore. This was
mainly on the back of new product launches by its subsidiary Criticare
Systems and Eurocor.
Its subsidiary Criticare Systems (CSI) launched next generation CO2/N2O
module, which is a compact version of Poet series CO2 detection
technology. This is used to measure inspired and expired CO2 and N2O
gases.
Cardiac Science added two ECGs under its Burdick brand, known for its
accuracy, reliability, and ease of use. The ECGs, available only in the US
deliver built-in, bi-directional communication so customers can connect
to leading EMRs.
During the quarter, another subsidiary Eurocor GmbH globally launched
second generation percutaneous transluminal angioplasty (PTA) balloon
technology, FREEWAY. This technology is used for the treatment of
critical limb ischemia. It received Congormite European approvals for
coronary bare metal stent brands eMagic and eFlex and DCGI approval
for drug coated stent delivery balloon MAGICAL.
ƒ EBITDA margins decline by 490 bps
EBITDA margins declined by ~ 490 bps YoY to 29.4% on account of
consolidation of Cardiac Science, which is incurring losses at the EBITDA
level. Employee cost steeply increased by ~310 bps (as percentage of
sales) due to addition of new employees at the Malaysian SEZ and
consolidation of Cardiac Science employees. EBITDA in value term
increased by 39% to | 123 crore.
ƒ Net profit up by 46%
OCL’s net profit rose 46% YoY to | 95.9 crore mainly on account of an
improved performance of the base business and also on the back of other
income of | 10.46 crore (loss of | 6.1 crore in Q3FY10). This was driven
by forex gain and the royalties received by EU and US subsidiaries.
Cardiac Science acquisition
Opto Circuit acquired US-based Cardiac Sciences in December 2010 for
US$85 million. The acquisition was funded through debt (US$55 million)
and internal accruals. Cardiac Science develops, manufactures and
markets advanced diagnostic and therapeutic cardiology devices and
systems. CSC is a loss making company with annual sales of around US$
140 million. During December 2010, CSC registered sales of | 64 crore
and net profit of | 2.3 crore. OCL clocked higher sales and marginal profit
due to execution of a big tender order during the month. The company
expects CSC to break even at the EBITDA level from Q2FY12.
Valuation
With the acquisition of Cardiac Science, the company has further
consolidated its non-invasive segment by filling the portfolio gap of
automated external defibrillators (AEDs), electrocardiograph (ECGs),
holters, etc. The global non-invasive devices segment (which accounts for
72% of the company’s sales) is slated to grow at a CAGR of ~25-30%
during 2010-15 on account of robust demand for patient monitors and
accessories. On the other hand, we also expect the invasive segment to
grow ~20-25% on the back of new product launches by Eurocor. Overall,
we expect Opto’s sales, EBITDA and PAT to grow at a CAGR of 45%, 22%
and 24%, respectively, between FY10 and FY12E. We have downgraded
the multiple from 16x to 14x on account of contingency associated with
Cardiac’s profitability and also on account of two recalls of AEDs by
Cardiac Science due to safety issues raised by USFDA. Even then, there
will be substantial headroom after the recent correction in the stock. Our
target price is | 307 based on 14x FY12E EPS of | 21.9.
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