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Result highlights
Better than expected results: Opto Circuits India (Opto) reported a 21.7%
year on year (YoY) rise in net sales to Rs662.7 crore in Q4FY2012, which is 15%
better than our estimate of Rs576 crore. The growth is partly contributed by
favourable currency and additional revenue from new product launches in the
non-invasive segments. However, the operating profit margin (OPM) remained
virtually flat at 22.1% (up 24bps YoY), which is the lowest in three sequential
quarters of FY2012, mainly due to firmer raw material costs. Nonetheless, due
to a better than expected other income and tax credit of Rs77.20 crore, the
net profit ballooned by 129% to Rs209.3 crore. If we assume an average tax
rate of 5% (the same effective rate as achieved in M9FY2012) for recurring
business (to exclude one-off elements in tax), then the net profit works out to
Rs126 crore, which is 15% better than our estimate of Rs109 crore.
Remarkable improvement in working capital cycle: During FY2012, the working
capital days have reduced to 252 days from 286 days in FY2011, primarily on
better inventory and debtors management. This resulted in only a 31% rise in
working capital during FY2012 as compared to a 49% rise in net sales during
the year.
We fine tune earnings estimates; maintain target price and recommendation:
Taking cues from Q4FY2012 results, we have fine tuned our estimates for FY2013
and FY2014. However, this does not result in any significant change in our earlier
earnings estimates. Therefore, we maintain our Buy
recommendation with a target price of Rs302 (not
changed), which implies 12x average earnings for
FY2013E and FY2014E.
Impresive rise in non-invasive segment
Growth in revenue during Q4FY2012 is primarily
attributable to favourable currency movement (INR
depreciated by 11%YoY against the US dollar) and an
impressive jump in non-invasive segments (medical
equipments and consumables), which witnessed a 24% Yo-
Y rise to Rs510 crore. In fact, the company is witnessing
better acceptability for its newly launched portable heart
monitor called MySense and automated external
defibrillators (AED) in the market
Outlook
Opto’s Q4FY2012 performance has been better than
expected and it reaffirms our belief in its strong business
model. However, the revenue growth in FY2012 was driven
by new product launches and performance of the newly
acquired Cardiac Science. Going forward, we believe
growth would be moderate on a high base of FY2012. We
expect a revenue compounded annual growth rate (CAGR)
of 16% and a profit CAGR of 8% over FY2012-14. However,
new products launches will give further upside to this
estimate.
We fine tune estimates, maintain target price and
recommendation
Taking cues from Q4FY2014 results and from our
interaction with the company’s management, we fine tune
our estimates for FY2013 and FY2014. However, we
maintain our target price at Rs302 (adjusted
performance), which implies 12x average earnings for
FY2013 and FY2014. The stock is currently trading at 7x
average earnings for FY2013 and FY2014.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result highlights
Better than expected results: Opto Circuits India (Opto) reported a 21.7%
year on year (YoY) rise in net sales to Rs662.7 crore in Q4FY2012, which is 15%
better than our estimate of Rs576 crore. The growth is partly contributed by
favourable currency and additional revenue from new product launches in the
non-invasive segments. However, the operating profit margin (OPM) remained
virtually flat at 22.1% (up 24bps YoY), which is the lowest in three sequential
quarters of FY2012, mainly due to firmer raw material costs. Nonetheless, due
to a better than expected other income and tax credit of Rs77.20 crore, the
net profit ballooned by 129% to Rs209.3 crore. If we assume an average tax
rate of 5% (the same effective rate as achieved in M9FY2012) for recurring
business (to exclude one-off elements in tax), then the net profit works out to
Rs126 crore, which is 15% better than our estimate of Rs109 crore.
Remarkable improvement in working capital cycle: During FY2012, the working
capital days have reduced to 252 days from 286 days in FY2011, primarily on
better inventory and debtors management. This resulted in only a 31% rise in
working capital during FY2012 as compared to a 49% rise in net sales during
the year.
We fine tune earnings estimates; maintain target price and recommendation:
Taking cues from Q4FY2012 results, we have fine tuned our estimates for FY2013
and FY2014. However, this does not result in any significant change in our earlier
earnings estimates. Therefore, we maintain our Buy
recommendation with a target price of Rs302 (not
changed), which implies 12x average earnings for
FY2013E and FY2014E.
Impresive rise in non-invasive segment
Growth in revenue during Q4FY2012 is primarily
attributable to favourable currency movement (INR
depreciated by 11%YoY against the US dollar) and an
impressive jump in non-invasive segments (medical
equipments and consumables), which witnessed a 24% Yo-
Y rise to Rs510 crore. In fact, the company is witnessing
better acceptability for its newly launched portable heart
monitor called MySense and automated external
defibrillators (AED) in the market
Outlook
Opto’s Q4FY2012 performance has been better than
expected and it reaffirms our belief in its strong business
model. However, the revenue growth in FY2012 was driven
by new product launches and performance of the newly
acquired Cardiac Science. Going forward, we believe
growth would be moderate on a high base of FY2012. We
expect a revenue compounded annual growth rate (CAGR)
of 16% and a profit CAGR of 8% over FY2012-14. However,
new products launches will give further upside to this
estimate.
We fine tune estimates, maintain target price and
recommendation
Taking cues from Q4FY2014 results and from our
interaction with the company’s management, we fine tune
our estimates for FY2013 and FY2014. However, we
maintain our target price at Rs302 (adjusted
performance), which implies 12x average earnings for
FY2013 and FY2014. The stock is currently trading at 7x
average earnings for FY2013 and FY2014.
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