Opto Circuits India- Inorganic and innovation-led growth:: Macquarie Research,

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Opto Circuits India
Inorganic and innovation-led growth
Company Profile
 Opto Circuits (OPTC) engages in the design, development, manufacture, and
marketing of medical electronic devices and health care products primarily in
India, Europe, the Middle East, the Far East, the United States, and South Africa.
OPTC has established itself as a world class supplier of non-invasive OEM
Optical sensors in the field of patient monitoring system. OPTC, established in
1992, is in a very specialized, technology oriented Opto electronic industry for 16
years. The OPTC range of products includes pulse oximeters, pulse oximeter
sensors, fluid warmers, cholesterol monitors & stents. OPTC has a state of the art
manufacturing and R&D facility at Bangalore with 50 people in the R&D team.

Business Fundamentals
 Fast growing Medical Equipment Industry: Medical Equipment (critical
care & tertiary care medical devices) is a fast growing industry. According to
the World Health Organization (WHO), the industry has been growing at a
~17% CAGR for the last 5 years and is expected to grow at a 15% CAGR
over the next 5 years. This would lead to a medical equipment market size of
~US$500bn by CY2015. OPTC, being one of the leading players in the
industry, may be able to capitalize on the growing opportunities. Uniqueness
and Strong complementary assets have been the main determining factors
and drivers for the stent industry, limiting the industry to 3-4 players. Another
entry barrier for a new entrant is the capital intensive (establishing sales force)
nature of the industry as medical device sales are highly relationship driven.
 Inorganic strategy to achieve growth: OPTC is pursuing an inorganic
growth strategy in terms of its product & client base. In the last nine years,
OPTC has made eight successful acquisitions, of which the Eurocore &
Criticare acquisitions have been major turning points. Eurocore is a pioneer in
the field of invasive cardiology while Criticare has established product &
technological leadership in anaesthetic gas monitoring, vital signs monitoring,
gas & agent analysis. Critcare has helped OPTC to expand its non-invasive
business product line and also make available these offerings to newer
markets together with strengthening its US presence. OCIL expects these two
acquisitions to be the major catalysts for its future growth.
 Strong R&D to drive innovation-led growth: Both the invasive and noninvasive
segments of the medical equipment industry are highly
technologically driven, with newer product launches making the existing
variants obsolete. We believe OPTC is consciously endeavouring to be a
leader in innovations with newer product developments and has continued to
improve its product line with new launches. OPTC has a strong R&D setup at
Bangalore (100% EOU status) with 50 people involved.
Consensus valuation
 Currently OPTC is trading at a Bloomberg consensus PE of 10x FY12E earnings
and ~18 x FY12E EV/EBITDA.


Opto Circuits India Aide Memoire
1. What is the current global market for patient monitoring systems and how is it going to fair in the next 3-5 years? What is
your current market share in patient monitoring systems?
2. What is the current global market for Stents and how will this market develop over the next 3-5 years? What is your current
market share in Stents?
3. Please give an update on Regulatory approval for Unetixs to sell Stents in the US and Europe.
4. Please explain the competitive scenarios in each of your products.
5. Please provide a brief on your recent acquisitions. How is the integration process going?
6. What is the current net Debt? Cost of Debt?
7. What are your future capex plans, if any? What will the R&D expense be going forward?
8. Do you have any acquisition plans for the near future?