Showing posts with label Opto Circuits. Show all posts
Showing posts with label Opto Circuits. Show all posts
02 June 2013
10 June 2012
Technical QUERY CORNER -Opto Circuits, MCX, Rashtriya Chemicals, HDFC, Glenmark, Page Industries ::Business Line
I am a long-term investor, holding shares of Opto Circuits at Rs 250 and Multi Commodity Exchange of India (MCX) at Rs 1,280. Kindly advise the prospects and future growth of these shares.
V.Rajaiah
Opto Circuits India (Rs 154.4): The stock peaked out around your buy price at Rs 252 in September 2010. Since then, it has been on a long-term downtrend. In February 2012, the stock encountered resistance around Rs 220 and continued its long-term downtrend.
Medium-term trend is down for the stock since this February. As long as the stock trades above the key long-term support band between Rs 140 and Rs 150, long-term investors can hold the stock with stop at Rs 140. A fall below this band will reinforce the bearish momentum and pull the stock down to Rs 120 and then to Rs 100 in the forthcoming months.
An upward reversal from the aforesaid support range will lift the stock higher to Rs 175 levels and then to Rs 190. Only a strong rally above the Rs 210 and Rs 220 zone will alter the stock's downtrend and take it higher to Rs 260 in the long-term.
29 May 2012
28 May 2012
11 February 2012
Opto Circuits :Q3FY12 – Impressive growth in top line; but high tax outgo and interest pull down margins :GEPL
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Summary
At the CMP of Rs261, Opto Circuits is trading at 10.59x and 8.64x its consensus FY12E and FY13E earnings estimates. Although it has no comparable listed peer in India, Opto is cheaper on valuations compared to its global peers; viz., Medtronics, Boston Scientific and Johnson & Johnson.
09 February 2012
Buy Opto Circuits; Target : Rs 309 :: ICICI Securities, (pdf link)
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PDF link for report- click here
Q o Q m a r g i n i m p r o v e m e n t , p o s i t i v e s u r p r i s e …
Opto Circuits’ Q3FY12 results were above our expectations. Net sales
grew by 46.4% to | 611.3 crore, slightly above our estimates of | 584
crore, driven by overall business growth, a favourable currency and
additional one months sales of CSC. Excluding sales from cardiac from
both in Q3FY12 and Q3FY11 and currency benefit, the like-to-like sales
grew 23% YoY. After two muted quarters, the invasive segment clocked
healthy growth of 25% YoY to | 130 crore. The EBITDA margin declined
~140 bps YoY to 28% due to consolidation of Cardiac Science
Corporation (CSC) but surprisingly the margins expanded 50 bps QoQ.
The increase in the interest cost during the quarter restricted net profit
growth to 31% to | 125 crore, above our expectation of |112 crore. The
board also announced a bonus issue in the ratio of 3:10. We are
maintaining our BUY rating on the stock.
ƒ Plans to launch MySense Heart device in US market in Q4FY12
The non-invasive (medical devices and consumables) segment
witnessed robust growth of 56% to | 477 crore on the back of
consolidation of Cardiac Science, newly owned tenders and restarted distribution of Powerheart AED in the Japanese market.
During the quarter, Opto Circuits received USFDA approval for
wearable Holter cardiac monitor MySense Heart. The company is
planning to launch the device in the US market at the fag end of
FY12 and also in other geographies in FY13. It will also launch low
cost AED in the US market in Q4FY12.
V a l u a t i o n
New product launches and tapping new geographies for existing
products augurs well for the company to maintain the growth tempo.
Commissioning of the Vizag and Malaysian facilities post approval will
give further boost to the improved performance. Stretched working
capital cycle, however, still remains a drag on the valuation. We expect
sales, EBITDA and PAT to grow at a CAGR of 30%, 28% and 19%,
respectively, during FY11-13E. We have valued the stock at 11x FY13E
EPS of | 28.1. We maintain our BUY recommendation.
India Equity Research Reports, IPO and Stock News
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PDF link for report- click here
Q o Q m a r g i n i m p r o v e m e n t , p o s i t i v e s u r p r i s e …
Opto Circuits’ Q3FY12 results were above our expectations. Net sales
grew by 46.4% to | 611.3 crore, slightly above our estimates of | 584
crore, driven by overall business growth, a favourable currency and
additional one months sales of CSC. Excluding sales from cardiac from
both in Q3FY12 and Q3FY11 and currency benefit, the like-to-like sales
grew 23% YoY. After two muted quarters, the invasive segment clocked
healthy growth of 25% YoY to | 130 crore. The EBITDA margin declined
~140 bps YoY to 28% due to consolidation of Cardiac Science
Corporation (CSC) but surprisingly the margins expanded 50 bps QoQ.
The increase in the interest cost during the quarter restricted net profit
growth to 31% to | 125 crore, above our expectation of |112 crore. The
board also announced a bonus issue in the ratio of 3:10. We are
maintaining our BUY rating on the stock.
ƒ Plans to launch MySense Heart device in US market in Q4FY12
The non-invasive (medical devices and consumables) segment
witnessed robust growth of 56% to | 477 crore on the back of
consolidation of Cardiac Science, newly owned tenders and restarted distribution of Powerheart AED in the Japanese market.
During the quarter, Opto Circuits received USFDA approval for
wearable Holter cardiac monitor MySense Heart. The company is
planning to launch the device in the US market at the fag end of
FY12 and also in other geographies in FY13. It will also launch low
cost AED in the US market in Q4FY12.
V a l u a t i o n
New product launches and tapping new geographies for existing
products augurs well for the company to maintain the growth tempo.
Commissioning of the Vizag and Malaysian facilities post approval will
give further boost to the improved performance. Stretched working
capital cycle, however, still remains a drag on the valuation. We expect
sales, EBITDA and PAT to grow at a CAGR of 30%, 28% and 19%,
respectively, during FY11-13E. We have valued the stock at 11x FY13E
EPS of | 28.1. We maintain our BUY recommendation.
22 January 2012
QUERY CORNER: Sterlite Industries, UCO Bank, Mahindra Satyam, TVS Motor, Opto Circuits, GTL Infrastructure, Berger Paints, IOB ::Business Line
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Please advise me on the outlook for Sterlite Industries and UCO bank bought at Rs 130 and Rs 65 respectively.
K. Kunhiraman
Sterlite Industries (Rs 113.9): After peaking out in January 2010, Sterlite Industries has been on a long-term downtrend. In August 2011, the stock broke through a key support at Rs 150 and accelerated downwards. But, its long-term support at Rs 86 provided base in December 2011 and the stock changed its direction. Investors with long-term perspective can consider buying the stock on declines with stop-loss at Rs 86. A strong move above the immediate resistance at Rs 130 will take the stock northwards to Rs 150 and to Rs 165 in the long-term. Nevertheless, a tumble below Rs 86 will drag the stock down to the Rs 70 - 74 range.
Short-term trend has been up for the stock ever since bottoming out last month. But it is likely to face key resistance at Rs 120 in the days ahead. Failure to move above this resistance will pull the stock down to Rs 100. Significant supports below this level are at Rs 95 and Rs 86.
19 January 2012
Opto Circuits India Limited (Opto) Target Price: ` 315.00 :: Omi Advisors 2012 Ideas
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About the Company
Opto Circuits India Limited (Opto) is engaged in the design, manufacturing and marketing of medical devices in invasive as well as
non-invasive segments. The product portfolio of the company includes pulse oximeters, patient monitoring systems, sensors, digital
thermometers, anesthesia and respiratory care equipments, stents, catheters and other innovative products. Some of the well known
brands marketed by the company are Criticare, Mediaid, Unetixs and Eurocor. Opto is currently a group of fourteen companies.
The manufacturing facilities are located in India, USA and also in Malaysia. In India it has eight manufacturing facilities and in US
one. The company has R&D facility in India, US and Germany. Opto sells its products in 56 countries across the world.
Investment Rationale
The patient monitoring equipment industry is expected to grow at a CAGR of 29% over 2010 and 2015. It is expected to be of more
than USD8bn by 2015. Global markets for anesthesia monitoring and external defibrillators are expected to reach USD 7.3bn and
USD2.4bn respectively by 2016. The global peripheral vascular equipment market is expected to reach USD 300mn by 2016. The
global market for coronary stents is expected to grow at a CAGR of 2.5% and is expected to exceed USD 6.5bn by 2016.
Hospitals in US and many other developed countries are reducing their expenses on staff and replacing them by monitoring systems.
We expect the company will benefit through this as a major part of its revenue comes through exports.
To cut its operation cost, Opto is shifting its manufacturing units from the US to India. In the current fiscal the company is planning to
have a capex of ` 1.50-2.00bn. Consolidation of manufacturing structure and manufacturing bases will be the key focus area of the
company for some time.
Valuation
At ` 198 per share the stock is trading at a P/E of 7.97x for FY12E and 5.68x for FY13E. On the basis of P/BV, it is trading at 2.01x
and 1.48x for FY12E and FY13E respectively. Consolidated revenue and PAT are expected to grow at a CAGR of 43% and 36%
respectively over FY10 to FY13E. We recommend to buy this scrip with a target price of ` 315 per share.
India Equity Research Reports, IPO and Stock News
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About the Company
Opto Circuits India Limited (Opto) is engaged in the design, manufacturing and marketing of medical devices in invasive as well as
non-invasive segments. The product portfolio of the company includes pulse oximeters, patient monitoring systems, sensors, digital
thermometers, anesthesia and respiratory care equipments, stents, catheters and other innovative products. Some of the well known
brands marketed by the company are Criticare, Mediaid, Unetixs and Eurocor. Opto is currently a group of fourteen companies.
The manufacturing facilities are located in India, USA and also in Malaysia. In India it has eight manufacturing facilities and in US
one. The company has R&D facility in India, US and Germany. Opto sells its products in 56 countries across the world.
Investment Rationale
The patient monitoring equipment industry is expected to grow at a CAGR of 29% over 2010 and 2015. It is expected to be of more
than USD8bn by 2015. Global markets for anesthesia monitoring and external defibrillators are expected to reach USD 7.3bn and
USD2.4bn respectively by 2016. The global peripheral vascular equipment market is expected to reach USD 300mn by 2016. The
global market for coronary stents is expected to grow at a CAGR of 2.5% and is expected to exceed USD 6.5bn by 2016.
Hospitals in US and many other developed countries are reducing their expenses on staff and replacing them by monitoring systems.
We expect the company will benefit through this as a major part of its revenue comes through exports.
To cut its operation cost, Opto is shifting its manufacturing units from the US to India. In the current fiscal the company is planning to
have a capex of ` 1.50-2.00bn. Consolidation of manufacturing structure and manufacturing bases will be the key focus area of the
company for some time.
Valuation
At ` 198 per share the stock is trading at a P/E of 7.97x for FY12E and 5.68x for FY13E. On the basis of P/BV, it is trading at 2.01x
and 1.48x for FY12E and FY13E respectively. Consolidated revenue and PAT are expected to grow at a CAGR of 43% and 36%
respectively over FY10 to FY13E. We recommend to buy this scrip with a target price of ` 315 per share.
06 December 2011
Opto Circuits :TP: INR289 Neutral : Motilal Oswal
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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).
India Equity Research Reports, IPO and Stock News
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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).
20 November 2011
Buy Opto Circuits; Target :Rs 309:: ICICI Securities
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G r o w t h i n t a c t b u t W C c o n c e r n r e m a i n s …
Opto Circuits’ Q2FY12 results were slightly above our estimates. Results
are not comparable YoY as it acquired US based Cardiac Science (CSC),
NS Remedies and Unetixs Vascular in H2FY11. Net sales increased 69.6%
YoY to | 562 crore in line with our expectation of | 558 crore on the back
of 100% growth in non-invasive segment. EBITDA margins declined ~440
bps YoY to 27.5% due to consolidation of Cardiac Science Corporation
(CSC) while QoQ margins remained muted. The improvement in EBITDA
margins was not seen as the company has not capitalised any R&D cost
during the quarter. Net profit increased 57% to | 121 crore above our
expectation of |112 crore. With continuance of the strong quarterly
performance, we are maintaining our BUY rating on the stock.
ƒ Medical devices sales double
The non-invasive (medical devices and consumables) segment
witnessed a robust growth of 100% to | 464 crore on the back of the
consolidation of Cardiac Science and new tenders received by it.
Cardiac Science entered into an exclusive distribution agreement
with Omron Healthcare to distribute the JMHLW approved Omron
Automated External Defibrillator Powerheart G3 HDF-300 in Japan.
Japan is the second largest market in the world for AEDs with more
than 65000 AEDs sold annually.
ƒ Increase in working capital cycle remains a concern
The working capital cycle has increased by 20 days in H1FY12 to 241
days compared to 221 days in FY11 on the back of a sharp reduction
in current liabilities. Current liabilities have reduced from 169 days in
FY11 to 105 days in H1FY11. The debt increased around | 200 crore
from the yearly closing to | 1082 crore.
V a l u a t i o n
At the current market price, the stock is trading at ~10x FY12E EPS of |
24.2 and ~9x FY13E EPS of | 29.1, respectively. Overall, we expect
Opto’s sales, EBITDA and PAT to grow at a CAGR of 27%, 25% and 19%,
respectively, between FY11 and FY13E. We have valued the stock at |
309 i.e. 11x FY13E EPS of | 28.1 with a BUY rating.
India Equity Research Reports, IPO and Stock News
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G r o w t h i n t a c t b u t W C c o n c e r n r e m a i n s …
Opto Circuits’ Q2FY12 results were slightly above our estimates. Results
are not comparable YoY as it acquired US based Cardiac Science (CSC),
NS Remedies and Unetixs Vascular in H2FY11. Net sales increased 69.6%
YoY to | 562 crore in line with our expectation of | 558 crore on the back
of 100% growth in non-invasive segment. EBITDA margins declined ~440
bps YoY to 27.5% due to consolidation of Cardiac Science Corporation
(CSC) while QoQ margins remained muted. The improvement in EBITDA
margins was not seen as the company has not capitalised any R&D cost
during the quarter. Net profit increased 57% to | 121 crore above our
expectation of |112 crore. With continuance of the strong quarterly
performance, we are maintaining our BUY rating on the stock.
ƒ Medical devices sales double
The non-invasive (medical devices and consumables) segment
witnessed a robust growth of 100% to | 464 crore on the back of the
consolidation of Cardiac Science and new tenders received by it.
Cardiac Science entered into an exclusive distribution agreement
with Omron Healthcare to distribute the JMHLW approved Omron
Automated External Defibrillator Powerheart G3 HDF-300 in Japan.
Japan is the second largest market in the world for AEDs with more
than 65000 AEDs sold annually.
ƒ Increase in working capital cycle remains a concern
The working capital cycle has increased by 20 days in H1FY12 to 241
days compared to 221 days in FY11 on the back of a sharp reduction
in current liabilities. Current liabilities have reduced from 169 days in
FY11 to 105 days in H1FY11. The debt increased around | 200 crore
from the yearly closing to | 1082 crore.
V a l u a t i o n
At the current market price, the stock is trading at ~10x FY12E EPS of |
24.2 and ~9x FY13E EPS of | 29.1, respectively. Overall, we expect
Opto’s sales, EBITDA and PAT to grow at a CAGR of 27%, 25% and 19%,
respectively, between FY11 and FY13E. We have valued the stock at |
309 i.e. 11x FY13E EPS of | 28.1 with a BUY rating.
31 October 2011
Opto Circuits (India) Ltd. Management Meeting: Growth guidance maintained, Cardiac Science turnaround on track:: Takeaways from J.P. Morgan India Emerging Opportunities Access Days
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Maintain growth guidance: Management indicated that hospitals in EU/US are
not cutting spending on vital equipment, though some big-ticket capex plans have
been curtailed. OPTC is prepared for any potential slowdown; it had faced pricing
pressure in the US in 2008, but had managed to sustain margins by clubbing
consumables and equipment sales. While discounts were offered on the equipment,
Opto was able to price consumables at higher levels.
Cardiac science turnaround: Management guided to 10% revenue growth with
‘mid-teen’ margins for CY12. CSX resumed selling in Japan through Omron –
management said it would take two years for CSX to scale up to its historic levels.
Tie up with Mycell for stents: OPTC has tied up with Mycell - stent coating
specialist that is using Opto’s bare metal stents and coating it. Mycell is currently
undertaking clinical trials for CE certification and would file for USFDA approval
post CE approvals. OPTC could reconsider carrying out clinical trials for the US
on their own, and may potentially use the Mycell tie up as a route to gain entry into
the US invasive product market.
Consolidation of manufacturing operations: OPTC is consolidating its
operations in US and are phasing out the Rhode Island plant in US and shifting
production to Wisconsin, Malaysia and Vizag. It is also looking to move backend
R&D to Malaysia and India, which should help boost margins.
Working capital concerns overdone: Working capital levels in FY11 look
elevated as revenues for three acquisitions made during last year are consolidated
only for part of the year. Adjusted working levels are closer to 100 days (vs. 140
days as per FY11 balance sheet). Management expects receivable days to improve
going forward as it enters more contracts with GPs.
India Equity Research Reports, IPO and Stock News
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Maintain growth guidance: Management indicated that hospitals in EU/US are
not cutting spending on vital equipment, though some big-ticket capex plans have
been curtailed. OPTC is prepared for any potential slowdown; it had faced pricing
pressure in the US in 2008, but had managed to sustain margins by clubbing
consumables and equipment sales. While discounts were offered on the equipment,
Opto was able to price consumables at higher levels.
Cardiac science turnaround: Management guided to 10% revenue growth with
‘mid-teen’ margins for CY12. CSX resumed selling in Japan through Omron –
management said it would take two years for CSX to scale up to its historic levels.
Tie up with Mycell for stents: OPTC has tied up with Mycell - stent coating
specialist that is using Opto’s bare metal stents and coating it. Mycell is currently
undertaking clinical trials for CE certification and would file for USFDA approval
post CE approvals. OPTC could reconsider carrying out clinical trials for the US
on their own, and may potentially use the Mycell tie up as a route to gain entry into
the US invasive product market.
Consolidation of manufacturing operations: OPTC is consolidating its
operations in US and are phasing out the Rhode Island plant in US and shifting
production to Wisconsin, Malaysia and Vizag. It is also looking to move backend
R&D to Malaysia and India, which should help boost margins.
Working capital concerns overdone: Working capital levels in FY11 look
elevated as revenues for three acquisitions made during last year are consolidated
only for part of the year. Adjusted working levels are closer to 100 days (vs. 140
days as per FY11 balance sheet). Management expects receivable days to improve
going forward as it enters more contracts with GPs.
JPMorgan, Opto Circuits- Management Meeting: Growth guidance maintained, Cardiac Science turnaround on track
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We recently hosted Opto Circuits at the J.P. Morgan India SMID Corporate
Access Day. Management maintained that growth remains on track with invasive
business growing at 30% and non-invasive at 20%-25%. Cardiac Science
turnaround is on track and management expects it to deliver ‘mid-teen’ margins.
OPTC is consolidating its manufacturing operations to three key locations in US,
Malaysia and India, which will help operating margins. Working capital levels
for FY11 seem elevated as revenues for three acquisitions made in FY11 are
consolidated only for part of the year.
Maintain growth guidance: Management indicated that hospitals in EU/US
are not cutting spending on vital equipment, though some large ticket capex
plans have been curtailed. OPTC is prepared for any potential slowdown; it had
faced pricing pressure in the US in 2008, but had managed to sustain margins
by clubbing consumables and equipment sales. While discounts were offered
on the equipment, Opto was able to price consumables at higher levels.
Cardiac science turnaround: Management guided to 10% revenue growth
with ‘mid-teen’ margins for CY12. CSX has resumed selling in Japan through
Omron – management indicated it will take 2 years for CSX to scale up to its
historic levels.
Tie up with Mycell for stents: OPTC has tied up with Mycell - stent coating
specialist that is using Opto’s bare metal stents for coating. Mycell is currently
undertaking clinical trials for CE certification and would file for USFDA
approval post CE approvals. OPTC could reconsider carrying out clinical trials
for the US on their own, and may potentially use the Mycell tie up as a route to
gain entry into the US invasive product market.
Consolidation of manufacturing operations: OPTC is consolidating its
operations in US and are phasing out the Rhode Island plant in US and shifting
production to Wisconsin, Malaysia and Vizag. It is also looking to move
backend R&D to Malaysia and India, which should help boost margins.
Working Capital concerns overdone: Working capital levels in FY11 look
elevated as revenues for 3 acquisitions made during last year are consolidated
only for part of the year. Adjusted working levels are closer to 100 days (vs.
140 days as per FY11 balance sheet). Management expects receivable days to
improve going forward as it enters more contracts with GPs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We recently hosted Opto Circuits at the J.P. Morgan India SMID Corporate
Access Day. Management maintained that growth remains on track with invasive
business growing at 30% and non-invasive at 20%-25%. Cardiac Science
turnaround is on track and management expects it to deliver ‘mid-teen’ margins.
OPTC is consolidating its manufacturing operations to three key locations in US,
Malaysia and India, which will help operating margins. Working capital levels
for FY11 seem elevated as revenues for three acquisitions made in FY11 are
consolidated only for part of the year.
Maintain growth guidance: Management indicated that hospitals in EU/US
are not cutting spending on vital equipment, though some large ticket capex
plans have been curtailed. OPTC is prepared for any potential slowdown; it had
faced pricing pressure in the US in 2008, but had managed to sustain margins
by clubbing consumables and equipment sales. While discounts were offered
on the equipment, Opto was able to price consumables at higher levels.
Cardiac science turnaround: Management guided to 10% revenue growth
with ‘mid-teen’ margins for CY12. CSX has resumed selling in Japan through
Omron – management indicated it will take 2 years for CSX to scale up to its
historic levels.
Tie up with Mycell for stents: OPTC has tied up with Mycell - stent coating
specialist that is using Opto’s bare metal stents for coating. Mycell is currently
undertaking clinical trials for CE certification and would file for USFDA
approval post CE approvals. OPTC could reconsider carrying out clinical trials
for the US on their own, and may potentially use the Mycell tie up as a route to
gain entry into the US invasive product market.
Consolidation of manufacturing operations: OPTC is consolidating its
operations in US and are phasing out the Rhode Island plant in US and shifting
production to Wisconsin, Malaysia and Vizag. It is also looking to move
backend R&D to Malaysia and India, which should help boost margins.
Working Capital concerns overdone: Working capital levels in FY11 look
elevated as revenues for 3 acquisitions made during last year are consolidated
only for part of the year. Adjusted working levels are closer to 100 days (vs.
140 days as per FY11 balance sheet). Management expects receivable days to
improve going forward as it enters more contracts with GPs.
16 October 2011
Sizzling Stocks - United Breweries , Opto Circuits :: Business Line
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Sizzling Stocks - United Breweries (Rs 419.1)
India Equity Research Reports, IPO and Stock News
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Sizzling Stocks - United Breweries (Rs 419.1)
After forming a head and shoulder pattern spanning early May and early July this year, the stock broke through this pattern. It was on a medium-term downtrend. Nevertheless, it found support at its significant long-term base zone between Rs 350 and Rs 370 recently.
The stock rebounded 14 per cent with good volumes last week, conclusively penetrating its medium-term downtrend line. It can move higher and encounter resistance at around Rs 450 and the next significant resistance is at Rs 500. Only a strong breakthrough of Rs 500 will pave way for a rally to Rs 600 in the ensuing months. On the other hand, tumble below Rs 350 can drag the stock down to Rs 310 and Rs 280 or even to Rs 240 in the medium-term.
Opto Circuits (Rs 241.3)
Opto Circuits zoomed 15 per cent accompanied by good volumes after taking support from its long-term significant support level at Rs 210. It appears to have changed its trend upwards from a short-term perspective; a positive divergence in the daily relative strength index backs this reversal. However, the stock is currently testing resistance at around Rs 240.
A decisive breach of this level will reinforce the short-term up move and lift the stock upwards to Rs 265. Next key resistance above Rs 265 is at Rs 290. Failure to move above the aforesaid resistance can pull the stock down to Rs 220 and then to Rs 210 in the short-term.
24 September 2011
Buy Opto Circuits - Healthy organic growth aided by acquisitions ::Standard Chartered Research
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We initiate coverage on Opto Circuits with an Outperform
rating and price target of Rs310.
Acquisition is a key to business strategy given single digit
growth in key segments; managed and turned-around six
acquisitions in past five years contributing Rs16bn of
sales.
Unique presence in medical equipment as well as
interventional devices segment; cost management,
geographical expansion, new product introductions and
clinical trials to further the growth of the company.
We expect 22% sales CAGR (17% organic growth) led by
interventional sales growth and inorganic initiatives of
FY11.
Successful acquisition-led strategy in mature segments.
OPTC’s acquisition-led strategy (6 acquisitions in the past 5
years) in mature segments (medical equipment and
intervention devices) has been successful, generating Rs16bn
of revenue (37% of sales in FY07-11) and Rs2.9bn of profit in
the past five years with improvement in sales and profitability.
Ex FY11 acquisitions, we expect organic revenue growth of
17% over FY11-14E, against industry growth of 3-8%.
Product differentiation to drive interventional sales.
Geographical expansion, higher penetration of existing doctors
through clinical trials, new product introductions and ramp-up in
value added segments including DIOR are likely to drive 28%
CAGR in the segment (25% of FY11 sales) over FY11-14E.
Higher interventional growth aids OPTC’s margins given higher
margins in the segment.
Inorganic initiatives drive medical equipment segment. The
medical device segment (73% of FY11 sales) is likely to post
20% CAGR (11% organic growth) over FY11-14E, led by
recent acquisition of Cardiac Science. Focus on consolidation
with cost reduction, expansion in non-US markets and
improved profitability in Cardiac Science remain short-term
goals for OPTC.
Valuation. 12-month PT of Rs310, valuing OPTC at 10x
forward P/E, the lower range of FY09-11. 19% earnings CAGR
over FY11-14 support our valuations. Potential acquisitions are
not in our estimates. Proposed listing of Eurocor Healthcare is
aimed at unlocking value in intervention business, but not
currently built in given low visibility on timing and price.
Key risks. R&D volatility has margin impact; high earnings
sensitivity to US/EU markets; potential intangibles write-offs for
prior capitalized R&D; high working capital requirements.
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We initiate coverage on Opto Circuits with an Outperform
rating and price target of Rs310.
Acquisition is a key to business strategy given single digit
growth in key segments; managed and turned-around six
acquisitions in past five years contributing Rs16bn of
sales.
Unique presence in medical equipment as well as
interventional devices segment; cost management,
geographical expansion, new product introductions and
clinical trials to further the growth of the company.
We expect 22% sales CAGR (17% organic growth) led by
interventional sales growth and inorganic initiatives of
FY11.
Successful acquisition-led strategy in mature segments.
OPTC’s acquisition-led strategy (6 acquisitions in the past 5
years) in mature segments (medical equipment and
intervention devices) has been successful, generating Rs16bn
of revenue (37% of sales in FY07-11) and Rs2.9bn of profit in
the past five years with improvement in sales and profitability.
Ex FY11 acquisitions, we expect organic revenue growth of
17% over FY11-14E, against industry growth of 3-8%.
Product differentiation to drive interventional sales.
Geographical expansion, higher penetration of existing doctors
through clinical trials, new product introductions and ramp-up in
value added segments including DIOR are likely to drive 28%
CAGR in the segment (25% of FY11 sales) over FY11-14E.
Higher interventional growth aids OPTC’s margins given higher
margins in the segment.
Inorganic initiatives drive medical equipment segment. The
medical device segment (73% of FY11 sales) is likely to post
20% CAGR (11% organic growth) over FY11-14E, led by
recent acquisition of Cardiac Science. Focus on consolidation
with cost reduction, expansion in non-US markets and
improved profitability in Cardiac Science remain short-term
goals for OPTC.
Valuation. 12-month PT of Rs310, valuing OPTC at 10x
forward P/E, the lower range of FY09-11. 19% earnings CAGR
over FY11-14 support our valuations. Potential acquisitions are
not in our estimates. Proposed listing of Eurocor Healthcare is
aimed at unlocking value in intervention business, but not
currently built in given low visibility on timing and price.
Key risks. R&D volatility has margin impact; high earnings
sensitivity to US/EU markets; potential intangibles write-offs for
prior capitalized R&D; high working capital requirements.
15 September 2011
Opto Circuits India::Takeaways Motilal Oswal Annual Global Investor Conferences
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Key Takeaways
Guidance: Reiterates FY12 top-line growth of 40%
Opto Circuits' (OPTC) management reiterated its top-line growth guidance of 40% for
FY12. The growth will be partly driven by full-year consolidation of Cardiac Science
Corp (CSC). We estimate that net of CSC, the implied growth guidance for core revenue
is 20%. FY12 EBITDA margin guidance is 28% led by a turnaround in CSC operations
and we estimate capex of INR1.8b.
Management expects USD140m revenue, 10-12% EBITDA margin for CSC in
FY12
The management guidance is for flat ~USD140m revenue for CSC in FY12 since the
focus will be to improve CSC's profitability through internal restructuring. The
management guidance is for CSC's EBITDA margin of 10-12% in FY12, led by operational
consolidation of all the three US subsidiaries (CSC, Criticare and Mediaid), rationalization
of marketing spend and a reduction in the number of employees.
Invasive business to lead organic growth
The management expects 30% growth of the invasive business to be sustained in future.
This will be led by strong sales growth across product lines, the launch of new products,
expansion in emerging markets, greater acceptance for Dior and expansion in distribution.
Concerns include high debt, goodwill, deteriorating working capital
OPTC's total debt on the books is ~INR8.84b. The management guidance is not for debt
reduction in FY12. Goodwill stands at INR5.95b, ~45% of OPTC's net worth. The
management expects to take a one-time hit for goodwill after the implementation of
IFRS. Working capital cycle deteriorated in FY11 due to a shift of production from the
US to OPTC's Indian and Malaysian facilities. The management guidance is for a cut in
working capital requirement from FY13.
Valuation and view
OPTC delivered strong revenue, earnings growth and return ratios over the past few
years. Despite rapid growth OPTC is a marginal player in the global medical devices
industry, which gives it the opportunity to sustain its high revenue growth over the next
couple of years. However, an early financial turnaround of CSC, large goodwill and debt
on books along with high working capital requirements and very low free cash flow
generation are concerns. The stock trades at 12.8x FY12E and 10.2x FY13E EPS. Maintain
Neutral with a target price of INR318 (12x FY13E EPS).
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Key Takeaways
Guidance: Reiterates FY12 top-line growth of 40%
Opto Circuits' (OPTC) management reiterated its top-line growth guidance of 40% for
FY12. The growth will be partly driven by full-year consolidation of Cardiac Science
Corp (CSC). We estimate that net of CSC, the implied growth guidance for core revenue
is 20%. FY12 EBITDA margin guidance is 28% led by a turnaround in CSC operations
and we estimate capex of INR1.8b.
Management expects USD140m revenue, 10-12% EBITDA margin for CSC in
FY12
The management guidance is for flat ~USD140m revenue for CSC in FY12 since the
focus will be to improve CSC's profitability through internal restructuring. The
management guidance is for CSC's EBITDA margin of 10-12% in FY12, led by operational
consolidation of all the three US subsidiaries (CSC, Criticare and Mediaid), rationalization
of marketing spend and a reduction in the number of employees.
Invasive business to lead organic growth
The management expects 30% growth of the invasive business to be sustained in future.
This will be led by strong sales growth across product lines, the launch of new products,
expansion in emerging markets, greater acceptance for Dior and expansion in distribution.
Concerns include high debt, goodwill, deteriorating working capital
OPTC's total debt on the books is ~INR8.84b. The management guidance is not for debt
reduction in FY12. Goodwill stands at INR5.95b, ~45% of OPTC's net worth. The
management expects to take a one-time hit for goodwill after the implementation of
IFRS. Working capital cycle deteriorated in FY11 due to a shift of production from the
US to OPTC's Indian and Malaysian facilities. The management guidance is for a cut in
working capital requirement from FY13.
Valuation and view
OPTC delivered strong revenue, earnings growth and return ratios over the past few
years. Despite rapid growth OPTC is a marginal player in the global medical devices
industry, which gives it the opportunity to sustain its high revenue growth over the next
couple of years. However, an early financial turnaround of CSC, large goodwill and debt
on books along with high working capital requirements and very low free cash flow
generation are concerns. The stock trades at 12.8x FY12E and 10.2x FY13E EPS. Maintain
Neutral with a target price of INR318 (12x FY13E EPS).
12 September 2011
Opto Circuits - Monitoring healthy growth ::Macquarie Research,
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Opto Circuits
Monitoring healthy growth
Event
�� We initiate coverage on OPTC with an OP rating and TP of Rs325. We like
OPTC given its focus on the large global medical device market with high
entry barriers, its proficiency to turn around acquisitions by leveraging its wide
distribution network, and attractive valuation despite superior return ratios.
Impact
�� Riding global healthcare spending: With the ageing population, healthcarespending
is outpacing GDP growth globally. The global medical equipment
market is currently valued at ~ US$170b with OPTC still a marginal player
(
large product basket (invasive & non-invasive), wide distribution network and
cost competency, OPTC appears well-positioned to grow through market
share gains in the product lines where it operates.
�� Inorganic route to success: Opto’s sales and EPS CAGRs were 61% and
22% respectively in FY06-11, driven by its strategy of acquiring
underperforming businesses (it spent ~US$200m last decade on acquisitions)
and turning them around by reducing the cost base (by shifting manufacturing,
integrating the supply chain, deriving economies of scale) and cross-selling
products through its wide distribution network. Strong R&D/engineering set-up
with a focus on product development has helped it to sustain an edge in its
product lines.
�� Cardiac Science (CSCX) integration critical: OPTC acquired troubled US
based CSCX in Dec-10 at a total cost of US$85m (@ 0.6x EV/sales) to further
strengthen its non-invasive business (~80% of top-line) with the addition of
defibrillation & Cardiac monitoring. Opto expects significant synergies to drive
a turnaround at CSCX and initial signs are encouraging.
�� Invasive segment is key driver (~20% of sales) given the niche product
portfolio of coronary stents and catheters which have a large potential given
the limited competition. US launch (likely post FY14) is a long-term catalyst.
Earnings and target price revision
�� We initiate coverage with an Outperform rating and a TP of Rs325.
Price catalyst
�� 12-month price target: Rs325.00 based on a PER methodology.
�� Catalyst: 1) CSCX turnaround 2) Working capital improvement
Action and recommendation
�� OPTC is trading at 9.8x FY13E PER, at a significant discount to its
international peers, despite our 3yr EPS CAGR estimate of 19% and ROE of
26%. We value OPTC @ 12x FY13E earnings, in line with its historical mean.
In our view, CSCX’s turnaround & working capital improvement (FCF
generation) would be key valuation drivers for OPTC. Potential value
destroying acquisitions, a slowdown in healthcare spend and further working
capital deterioration would be the key risks on OPTC.
India Equity Research Reports, IPO and Stock News
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Opto Circuits
Monitoring healthy growth
Event
�� We initiate coverage on OPTC with an OP rating and TP of Rs325. We like
OPTC given its focus on the large global medical device market with high
entry barriers, its proficiency to turn around acquisitions by leveraging its wide
distribution network, and attractive valuation despite superior return ratios.
Impact
�� Riding global healthcare spending: With the ageing population, healthcarespending
is outpacing GDP growth globally. The global medical equipment
market is currently valued at ~ US$170b with OPTC still a marginal player
(
large product basket (invasive & non-invasive), wide distribution network and
cost competency, OPTC appears well-positioned to grow through market
share gains in the product lines where it operates.
�� Inorganic route to success: Opto’s sales and EPS CAGRs were 61% and
22% respectively in FY06-11, driven by its strategy of acquiring
underperforming businesses (it spent ~US$200m last decade on acquisitions)
and turning them around by reducing the cost base (by shifting manufacturing,
integrating the supply chain, deriving economies of scale) and cross-selling
products through its wide distribution network. Strong R&D/engineering set-up
with a focus on product development has helped it to sustain an edge in its
product lines.
�� Cardiac Science (CSCX) integration critical: OPTC acquired troubled US
based CSCX in Dec-10 at a total cost of US$85m (@ 0.6x EV/sales) to further
strengthen its non-invasive business (~80% of top-line) with the addition of
defibrillation & Cardiac monitoring. Opto expects significant synergies to drive
a turnaround at CSCX and initial signs are encouraging.
�� Invasive segment is key driver (~20% of sales) given the niche product
portfolio of coronary stents and catheters which have a large potential given
the limited competition. US launch (likely post FY14) is a long-term catalyst.
Earnings and target price revision
�� We initiate coverage with an Outperform rating and a TP of Rs325.
Price catalyst
�� 12-month price target: Rs325.00 based on a PER methodology.
�� Catalyst: 1) CSCX turnaround 2) Working capital improvement
Action and recommendation
�� OPTC is trading at 9.8x FY13E PER, at a significant discount to its
international peers, despite our 3yr EPS CAGR estimate of 19% and ROE of
26%. We value OPTC @ 12x FY13E earnings, in line with its historical mean.
In our view, CSCX’s turnaround & working capital improvement (FCF
generation) would be key valuation drivers for OPTC. Potential value
destroying acquisitions, a slowdown in healthcare spend and further working
capital deterioration would be the key risks on OPTC.
03 August 2011
Opto Circuits: TP: INR318 Neutral; Motilal Oswal
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Opto Circuits' 1QFY12 results were better than our expectations. Key highlights are:
Opto Circuits reported 78% YoY growth in revenue to INR5.2b (in line with our estimate) and 47% YoY growth in
EBITDA to INR1.4b (v/s our estimate of INR1.19b). EBITDA margin contracted by 570bp to 27.5% (well above our
estimate of 22.9%). Adjusted PAT grew 40% YoY to INR1.16b (v/s our estimate of INR922m).
Topline growth was led partly by the acquisition of CSC. Ex-CSC, we estimate 30% YoY growth in Opto's topline, led
by 33% YoY growth in the non-invasive segment. The invasive business reported revenue growth of 25% YoY.
EBITDA grew 47.5% YoY to INR1.43b (v/s our estimate of INR1.19b) while EBITDA margin contracted by 570bp to
27.5% (well above our estimate of 22.9%).
Adjusted PAT grew 40.6% YoY to INR1.16b (v/s our estimate of INR922m), in line with operational performance but
impacted by 2x increase in interest cost.
Opto has delivered strong revenue and earnings growth over the last few years. Also, it has consistently maintained its
high return ratios. Despite rapid growth, the company remains a marginal player in the global medical devices industry,
which gives it the opportunity to sustain its high revenue growth rate for the next couple of years. We believe that Opto
is likely to see 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, early financial
turnaround of CSC, large goodwill and debt on books coupled with high working capital requirements and very low free
cash flow generation remain concerns. The stock trades at 13x FY12E and 10.4x FY13E EPS. We maintain Neutral
with target price of INR318 (12x FY13E EPS).
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Opto Circuits' 1QFY12 results were better than our expectations. Key highlights are:
Opto Circuits reported 78% YoY growth in revenue to INR5.2b (in line with our estimate) and 47% YoY growth in
EBITDA to INR1.4b (v/s our estimate of INR1.19b). EBITDA margin contracted by 570bp to 27.5% (well above our
estimate of 22.9%). Adjusted PAT grew 40% YoY to INR1.16b (v/s our estimate of INR922m).
Topline growth was led partly by the acquisition of CSC. Ex-CSC, we estimate 30% YoY growth in Opto's topline, led
by 33% YoY growth in the non-invasive segment. The invasive business reported revenue growth of 25% YoY.
EBITDA grew 47.5% YoY to INR1.43b (v/s our estimate of INR1.19b) while EBITDA margin contracted by 570bp to
27.5% (well above our estimate of 22.9%).
Adjusted PAT grew 40.6% YoY to INR1.16b (v/s our estimate of INR922m), in line with operational performance but
impacted by 2x increase in interest cost.
Opto has delivered strong revenue and earnings growth over the last few years. Also, it has consistently maintained its
high return ratios. Despite rapid growth, the company remains a marginal player in the global medical devices industry,
which gives it the opportunity to sustain its high revenue growth rate for the next couple of years. We believe that Opto
is likely to see 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, early financial
turnaround of CSC, large goodwill and debt on books coupled with high working capital requirements and very low free
cash flow generation remain concerns. The stock trades at 13x FY12E and 10.4x FY13E EPS. We maintain Neutral
with target price of INR318 (12x FY13E EPS).
10 July 2011
Opto Circuits (India) :: target INR 382: KBS
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Opto Circuits (Opto) is engaged in design, manufacture and marketing of
USFDA‐listed, CE‐marked healthcare equipments and medical interventional
products such as cardiac and vital signs monitoring systems, anesthesia and
respiratory care equipment, automated external defibrillators (AEDs), stents,
catheters, body implants etc. The company has grown around 11 times in terms of
turnover from FY06 to FY11 owing to its rapid acquisitions in Europe and US.
VALUE DRIVERS
Medical Devices – A Rapidly Expanding Market:
The medical equipment market which is about 50% of the world pharmaceutical market
in terms of size has been growing much faster than its drug counterpart since the past
few years. The demand for healthcare services in emerging nations, the need for
reducing hospital stays and the aging world population are the some of the key drivers.
Opto Circuits, with a strong geographical presence and diversified product portfolio, is
set to benefit from this increased focus.
Non-Invasive Business Offers Strong Revenue Visibility:
Non-Invasive segment is the key contributor (about 75~80%) to Opto’s revenue. The
recent strategic acquisitions of Unetixs Vascular (Unetixs) and Cardiac Science
Corporation (CSC) will further widen Opto’s medical devices portfolio and help to
strengthen its foothold globally, particularly in USA & Europe. The CSC transaction
will not only open many new global markets but also enhance its product offering and
presence in US. Thus, this business will continue to provide strong revenue visibility.
Invasive Business – Key Long Term Growth Engine:
The acquisition of NS Remedies will reduce manufacturing costs of bare metal stents
significantly, thereby reducing the company’s dependency on external agencies. Also,
Eurocor’s innovative product pipeline will aid Opto in achieving a deeper market
penetration in India & emerging markets over the years as minimally invasive
treatments, which save patients a lot of time and costs, are increasingly preferred over
full surgeries today.
Driving Growth through Diverse Products:
From having 49 patents and 34 trademarks in FY10 the company grew to have to 168
patents and 53 pending patent applications as on Dec., 10, 2010. Hence, through R&D
and acquisitions & alliances, the company built an extensive product range which is
most preferred by the customers as it allows them to procure everything under one roof.
This not only gives Opto better bargaining power but also translates in additional sales
of more products, thus improving the net earnings.
Extensive Marketing & Distribution Network:
The newly acquired Unetixs and CSC offers cross-selling opportunities to Opto as it
can market the products by Medaid and Criticare in key US healthcare establishments.
Also, the company has been sharpening its focus in LATAM and South Asian markets
facilitates in developing longstanding relationships with its target customers as strong
customer base remains a key strength for Opto.
VALUATION: At the CMP of INR 297.60, the P/E ratio works 15.1x based on FY11
EPS of INR 19.8. On basis of P/E ratio of 14x and FY13E EPS of INR 27.3, the fair
value per share works out to INR 382. Considering its presence in fast-growing niche
business segments and strong earnings growth, investors can buy the stock from 9-12
months perspective for a potential upside of around 28%.
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Opto Circuits (Opto) is engaged in design, manufacture and marketing of
USFDA‐listed, CE‐marked healthcare equipments and medical interventional
products such as cardiac and vital signs monitoring systems, anesthesia and
respiratory care equipment, automated external defibrillators (AEDs), stents,
catheters, body implants etc. The company has grown around 11 times in terms of
turnover from FY06 to FY11 owing to its rapid acquisitions in Europe and US.
VALUE DRIVERS
Medical Devices – A Rapidly Expanding Market:
The medical equipment market which is about 50% of the world pharmaceutical market
in terms of size has been growing much faster than its drug counterpart since the past
few years. The demand for healthcare services in emerging nations, the need for
reducing hospital stays and the aging world population are the some of the key drivers.
Opto Circuits, with a strong geographical presence and diversified product portfolio, is
set to benefit from this increased focus.
Non-Invasive Business Offers Strong Revenue Visibility:
Non-Invasive segment is the key contributor (about 75~80%) to Opto’s revenue. The
recent strategic acquisitions of Unetixs Vascular (Unetixs) and Cardiac Science
Corporation (CSC) will further widen Opto’s medical devices portfolio and help to
strengthen its foothold globally, particularly in USA & Europe. The CSC transaction
will not only open many new global markets but also enhance its product offering and
presence in US. Thus, this business will continue to provide strong revenue visibility.
Invasive Business – Key Long Term Growth Engine:
The acquisition of NS Remedies will reduce manufacturing costs of bare metal stents
significantly, thereby reducing the company’s dependency on external agencies. Also,
Eurocor’s innovative product pipeline will aid Opto in achieving a deeper market
penetration in India & emerging markets over the years as minimally invasive
treatments, which save patients a lot of time and costs, are increasingly preferred over
full surgeries today.
Driving Growth through Diverse Products:
From having 49 patents and 34 trademarks in FY10 the company grew to have to 168
patents and 53 pending patent applications as on Dec., 10, 2010. Hence, through R&D
and acquisitions & alliances, the company built an extensive product range which is
most preferred by the customers as it allows them to procure everything under one roof.
This not only gives Opto better bargaining power but also translates in additional sales
of more products, thus improving the net earnings.
Extensive Marketing & Distribution Network:
The newly acquired Unetixs and CSC offers cross-selling opportunities to Opto as it
can market the products by Medaid and Criticare in key US healthcare establishments.
Also, the company has been sharpening its focus in LATAM and South Asian markets
facilitates in developing longstanding relationships with its target customers as strong
customer base remains a key strength for Opto.
VALUATION: At the CMP of INR 297.60, the P/E ratio works 15.1x based on FY11
EPS of INR 19.8. On basis of P/E ratio of 14x and FY13E EPS of INR 27.3, the fair
value per share works out to INR 382. Considering its presence in fast-growing niche
business segments and strong earnings growth, investors can buy the stock from 9-12
months perspective for a potential upside of around 28%.
24 May 2011
JPMorgan:: Opto Circuits 4QFY11: Cardiac Science turnaround bodes well, FY12E guidance pared
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Opto Circuits (India) Ltd
Overweight
OPTO.BO, OPTC IN
4QFY11: Cardiac Science turnaround bodes well,
FY12E guidance pared
Opto reported Q4/FY11 numbers better than street expectations. Cardiac
Science reported profit for first time indicating strong turnaround. We cut
estimates on lower than expected guidance for FY12, higher interest and
depreciation costs. Remain OW with a revised PT of Rs385.
• Cardiac Science turnaround. Management attributed signifcant cost
savings to overall reduction of employee headcount, alignment of various
functions with Criticare and Untexis’ US operations and moving of backend
R&D to India. CSC reported a PAT margin of 9% (for 4 month period)
indicating strong turnaround. For FY12, Management guided to flat
revenues and EBITDA margin of 10%-12% for CSC.
• Concerns on working capital: Opto’s inventory days worsened to 100
days in FY11 from 75 days in FY10. Management indicated that the rise in
inventory in primarily due to stocking up of supplies at new plants of
Malaysia and Vizag. Inventory is expected to come down over the next
couple of quarters as production ramps up at new plants.
• FY11 results highlights. Revenues were up 27% YoY (excl. CSC) with
Invasive up 27% YoY and Non-Invasive up 27% YoY. EBITDA margin
came in at 28% (-600bps YoY) mainly on account of higher staff expenses
(from CSC acquisition) and higher overheads (CSC acquisition/increased
trade shows particpation). PAT was up 39% YoY with tax rates at 6% (vs.
10% in FY10). Management guided to revenue growth of 15%-20% for
Non-Invasive and 35%-40% for Invasive products in FY12.
• Estimates and Price target changes: We cut our FY12/13 estimates by
3%/11% on back of lower than expected revenue guidance for FY12 and
higher depreciation and interest costs. We roll forward our PT to Mar-12
(Sep-11 earlier), now at Rs385 based on 15x Sep-12E P/E, in-line with
global peer group. Key risks include potential large ticket acquisitions,
increase in working capital intensity, failure to get accreditation for products
in new markets and adverse foreign currency.
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Opto Circuits (India) Ltd
Overweight
OPTO.BO, OPTC IN
4QFY11: Cardiac Science turnaround bodes well,
FY12E guidance pared
Opto reported Q4/FY11 numbers better than street expectations. Cardiac
Science reported profit for first time indicating strong turnaround. We cut
estimates on lower than expected guidance for FY12, higher interest and
depreciation costs. Remain OW with a revised PT of Rs385.
• Cardiac Science turnaround. Management attributed signifcant cost
savings to overall reduction of employee headcount, alignment of various
functions with Criticare and Untexis’ US operations and moving of backend
R&D to India. CSC reported a PAT margin of 9% (for 4 month period)
indicating strong turnaround. For FY12, Management guided to flat
revenues and EBITDA margin of 10%-12% for CSC.
• Concerns on working capital: Opto’s inventory days worsened to 100
days in FY11 from 75 days in FY10. Management indicated that the rise in
inventory in primarily due to stocking up of supplies at new plants of
Malaysia and Vizag. Inventory is expected to come down over the next
couple of quarters as production ramps up at new plants.
• FY11 results highlights. Revenues were up 27% YoY (excl. CSC) with
Invasive up 27% YoY and Non-Invasive up 27% YoY. EBITDA margin
came in at 28% (-600bps YoY) mainly on account of higher staff expenses
(from CSC acquisition) and higher overheads (CSC acquisition/increased
trade shows particpation). PAT was up 39% YoY with tax rates at 6% (vs.
10% in FY10). Management guided to revenue growth of 15%-20% for
Non-Invasive and 35%-40% for Invasive products in FY12.
• Estimates and Price target changes: We cut our FY12/13 estimates by
3%/11% on back of lower than expected revenue guidance for FY12 and
higher depreciation and interest costs. We roll forward our PT to Mar-12
(Sep-11 earlier), now at Rs385 based on 15x Sep-12E P/E, in-line with
global peer group. Key risks include potential large ticket acquisitions,
increase in working capital intensity, failure to get accreditation for products
in new markets and adverse foreign currency.
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