Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
OPTC reported 69.6% YoY growth in revenue to INR5.62b (v/s our estimate of INR5.41b), 46.3% YoY growth in
EBITDA to INR1.55b (v/s our estimate of INR1.39b) while EBITDA margin contracted by 438bp to 27.5% (v/s our
estimate of 25.8%). Adjusted PAT grew 56.3% YoY to INR1.21b (v/s our estimate of INR991m), led by better operational
performance and lower depreciation and tax expense.
Topline growth was led primarily by the acquisition of CSC. Ex-CSC, OPTC's topline is estimated to have grown by
24.3% YoY to INR4.12b, led by the non-invasive segment, which is estimated to have grown 35.9% YoY.
EBITDA growth was muted compared to topline growth because of higher staff cost and other expenses related to
CSC acquisition.
Adjusted PAT grew 56.3% YoY to INR1.21b (v/s our estimate of INR991m), boosted by lower than estimated depreciation
and tax expense.
OPTC has delivered strong revenue and earnings growth over the last few years. It has consistently maintained its high
return ratios. Despite rapid growth, the company still remains a marginal player in the global medical devices industry,
which gives OPTC the opportunity to sustain its high revenue growth rate for the next couple of years. We believe that
OPTC should strong growth in both the invasive and non-invasive businesses, on the back of large market opportunity,
expanding distribution network and geographical spread, new product launches and low base. However, rapidly rising
debt on the books, large goodwill coupled with high working capital requirements and very low free cash flow generation
remain concerns. Also, the company is planning to raise money through equity dilution in one of its subsidiaries, which
will dilute earnings in the near future. The stock trades at 10.2x FY12E and 8.4x FY13E EPS. We maintain Neutral with
target price of INR289 (10x FY13E EPS).
Adjusted PAT grew 56.3% YoY to INR1.21b (v/s our estimate of INR991m), boosted by
lower than estimated depreciation and tax expense.
The management has guided revenue growth of 20% (excluding CSC) and EBITDA
margin of 27-28% for FY12. Based on 1HFY12 results, we believe that the management
will be able to surpass its FY12 guidance.
Aims at annual revenue of USD1b by FY15; guides 20-25% topline growth
The management aims at annual revenue of USD1b by FY15 and has guided topline
growth of 20-25% CAGR over the medium term. The FY15 revenue target looks tough,
as it entails over 25% revenue CAGR after FY12. The management's FY12 revenue
growth guidance of 40% is due to a year of consolidation of its newly acquired US company,
Cardiac Science Corp (CSC). Excluding this acquisition, growth of the other businesses is
indicated at 20% in FY12.
For CSC, the management has guided revenue of USD140m in FY12. Growth will be led
mainly by the invasive segment due to the large size of the opportunity, increasing
penetration, brand building efforts and low base. The management expects the invasive
business to post over 30% CAGR in the medium term. Growth in the non-invasive segment
will come from increased penetration in various markets, leveraging the distribution network
of acquired companies and new product launches.
Equity dilution in subsidiary on the cards
The management proposes to raise up to INR10b through an initial public offering (IPO)
of Opto Eurocor Healthcare Limited (OEHL), a wholly owned subsidiary in the invasive
segment. The funds raised will be used for clinical trials and on OEHL's marketing and
distribution activities.
OPTC is looking to dilute at least 25% of Opto's stake in OEHL. The management hopes
to get a ~USD800m valuation for OEHL, which appears stiff, in our view. A market cap
of USD800m values OEHL at ~8x FY11 revenue and ~40x FY11 PAT. The management
may look to dilute stake in other subsidiaries in future to achieve its target of USD1b in
revenue by FY15.
High debt, goodwill and deteriorating working capital remain concerns
Currently, the total debt on OPTC's book stands at ~INR11b, which translates into a debtequity
ratio of 0.9x. We believe that OPTC will have to raise further debt to fund its higher
growth guidance, which will push interest cost higher. Also, goodwill on the company's
books stands at INR4.45b, which is ~37% of its net worth. Any deterioration in market
dynamics leading to intangible write-offs may impact OPTC's financials. Further, its working
capital cycle deteriorated in FY11, with INR3.7b increase in non-cash net current assets.
OPTC's inventory days and debtor days had increased sharply during the year. However,
the management clarified that the increase in working capital was on account of shifting
of production from US to its Indian and Malaysian facility, and has guided reduction in
working capital cycle, going forward.
Upgrading EPS estimates by 5-12%
Post the 2QFY12 results, we are revising our earnings estimates to take into account
better than anticipated EBITDA margin and higher than expected interest cost. We now
estimate EPS at at INR23.9 (up 21.5%) for FY12 and at INR28.9 (up 21.3%) for FY13.
Valuation and view
OPTC has delivered strong revenue and earnings growth over the last few years. It has
consistently maintained its high return ratios. Despite rapid growth, the company still remains
a marginal player in the global medical devices industry, which gives OPTC the opportunity
to sustain its high revenue growth rate for the next couple of years. We believe that
OPTC should strong growth in both the invasive and non-invasive businesses, on the back
of large market opportunity, expanding distribution network and geographical spread, new
product launches and low base. However, rapidly rising debt on the books, large goodwill
coupled with high working capital requirements and very low free cash flow generation
remain concerns. Also, the company is planning to raise money through equity dilution in
one of its subsidiaries, which will dilute earnings in the near future. The stock trades at
10.2x FY12E and 8.4x FY13E EPS. We maintain Neutral with target price of INR289
(10x FY13E EPS).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
OPTC reported 69.6% YoY growth in revenue to INR5.62b (v/s our estimate of INR5.41b), 46.3% YoY growth in
EBITDA to INR1.55b (v/s our estimate of INR1.39b) while EBITDA margin contracted by 438bp to 27.5% (v/s our
estimate of 25.8%). Adjusted PAT grew 56.3% YoY to INR1.21b (v/s our estimate of INR991m), led by better operational
performance and lower depreciation and tax expense.
Topline growth was led primarily by the acquisition of CSC. Ex-CSC, OPTC's topline is estimated to have grown by
24.3% YoY to INR4.12b, led by the non-invasive segment, which is estimated to have grown 35.9% YoY.
EBITDA growth was muted compared to topline growth because of higher staff cost and other expenses related to
CSC acquisition.
Adjusted PAT grew 56.3% YoY to INR1.21b (v/s our estimate of INR991m), boosted by lower than estimated depreciation
and tax expense.
OPTC has delivered strong revenue and earnings growth over the last few years. It has consistently maintained its high
return ratios. Despite rapid growth, the company still remains a marginal player in the global medical devices industry,
which gives OPTC the opportunity to sustain its high revenue growth rate for the next couple of years. We believe that
OPTC should strong growth in both the invasive and non-invasive businesses, on the back of large market opportunity,
expanding distribution network and geographical spread, new product launches and low base. However, rapidly rising
debt on the books, large goodwill coupled with high working capital requirements and very low free cash flow generation
remain concerns. Also, the company is planning to raise money through equity dilution in one of its subsidiaries, which
will dilute earnings in the near future. The stock trades at 10.2x FY12E and 8.4x FY13E EPS. We maintain Neutral with
target price of INR289 (10x FY13E EPS).
Adjusted PAT grew 56.3% YoY to INR1.21b (v/s our estimate of INR991m), boosted by
lower than estimated depreciation and tax expense.
The management has guided revenue growth of 20% (excluding CSC) and EBITDA
margin of 27-28% for FY12. Based on 1HFY12 results, we believe that the management
will be able to surpass its FY12 guidance.
Aims at annual revenue of USD1b by FY15; guides 20-25% topline growth
The management aims at annual revenue of USD1b by FY15 and has guided topline
growth of 20-25% CAGR over the medium term. The FY15 revenue target looks tough,
as it entails over 25% revenue CAGR after FY12. The management's FY12 revenue
growth guidance of 40% is due to a year of consolidation of its newly acquired US company,
Cardiac Science Corp (CSC). Excluding this acquisition, growth of the other businesses is
indicated at 20% in FY12.
For CSC, the management has guided revenue of USD140m in FY12. Growth will be led
mainly by the invasive segment due to the large size of the opportunity, increasing
penetration, brand building efforts and low base. The management expects the invasive
business to post over 30% CAGR in the medium term. Growth in the non-invasive segment
will come from increased penetration in various markets, leveraging the distribution network
of acquired companies and new product launches.
Equity dilution in subsidiary on the cards
The management proposes to raise up to INR10b through an initial public offering (IPO)
of Opto Eurocor Healthcare Limited (OEHL), a wholly owned subsidiary in the invasive
segment. The funds raised will be used for clinical trials and on OEHL's marketing and
distribution activities.
OPTC is looking to dilute at least 25% of Opto's stake in OEHL. The management hopes
to get a ~USD800m valuation for OEHL, which appears stiff, in our view. A market cap
of USD800m values OEHL at ~8x FY11 revenue and ~40x FY11 PAT. The management
may look to dilute stake in other subsidiaries in future to achieve its target of USD1b in
revenue by FY15.
High debt, goodwill and deteriorating working capital remain concerns
Currently, the total debt on OPTC's book stands at ~INR11b, which translates into a debtequity
ratio of 0.9x. We believe that OPTC will have to raise further debt to fund its higher
growth guidance, which will push interest cost higher. Also, goodwill on the company's
books stands at INR4.45b, which is ~37% of its net worth. Any deterioration in market
dynamics leading to intangible write-offs may impact OPTC's financials. Further, its working
capital cycle deteriorated in FY11, with INR3.7b increase in non-cash net current assets.
OPTC's inventory days and debtor days had increased sharply during the year. However,
the management clarified that the increase in working capital was on account of shifting
of production from US to its Indian and Malaysian facility, and has guided reduction in
working capital cycle, going forward.
Upgrading EPS estimates by 5-12%
Post the 2QFY12 results, we are revising our earnings estimates to take into account
better than anticipated EBITDA margin and higher than expected interest cost. We now
estimate EPS at at INR23.9 (up 21.5%) for FY12 and at INR28.9 (up 21.3%) for FY13.
Valuation and view
OPTC has delivered strong revenue and earnings growth over the last few years. It has
consistently maintained its high return ratios. Despite rapid growth, the company still remains
a marginal player in the global medical devices industry, which gives OPTC the opportunity
to sustain its high revenue growth rate for the next couple of years. We believe that
OPTC should strong growth in both the invasive and non-invasive businesses, on the back
of large market opportunity, expanding distribution network and geographical spread, new
product launches and low base. However, rapidly rising debt on the books, large goodwill
coupled with high working capital requirements and very low free cash flow generation
remain concerns. Also, the company is planning to raise money through equity dilution in
one of its subsidiaries, which will dilute earnings in the near future. The stock trades at
10.2x FY12E and 8.4x FY13E EPS. We maintain Neutral with target price of INR289
(10x FY13E EPS).
The post is written in very a good manner and it entails many useful information for me. I appreciated what you have done here. I am always searching for informative information like this. Thanks for sharing with us.
ReplyDelete