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Opto Circuits: Stellar performance - Views on News from Equitymaster

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Opto Circuits: Stellar performance
Jan 18, 2011

Opto Circuits has announced 3QFY11 results. The company has reported 62.5% YoY and 45.7% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Consolidated topline grows 62.5% YoY in 3QFY11.
  • Operating profits increase 39.4% YoY during the quarter. However, margins declined by 490 bps due to increase in overall expenditure as a percentage of sales.
  • Net profits increase 45.7% YoY in 3QFY11 due to increase in other income, partially offset by higher depreciation and tax expenses.

Financial performance snapshot
(Rs m) 3QFY10  3QFY11  Change 9MFY10  9MFY11  Change  
Sales 2,570 4,177 62.5% 7431 10410 40.1%
Expenditure 1,689 2,948 74.6% 4872 7154 46.8%
Operating profit (EBDITA)    881 1,228 39.4% 2,559 3,256 27.2%
Operating profit margin (%) 34.3% 29.4%   34.4% 31.3%  
Other income     (61)  105   (53) 117  
Interest       72     88 22.7% 311 202 -35.1%
Depreciation       65  153 135.1% 179 358 100.4%
Profit before tax 683 1,091 59.7% 2,016 2,812 39.5%
Exceptional items  (0) (4)   (1) (2)  
Tax 25 127 407.0% 95 243 154.7%
Minority Interest  (1) (3)   (2) (7)  
Profit after tax/(loss) 657 957 45.7% 1,918 2,561 33.5%
Net profit margin (%) 25.6% 22.9%   25.8% 24.6%  
No. of shares (m)    183        
Basic  earnings per share (Rs)   5.22        
P/E ratio (x) *   13.9        
* On a trailing 12-months basis

What has driven performance in 3QFY11?
  • Consolidated top line increased 62.5% YoY during the quarter. Growth in standalone topline on the other hand came in at a lower rate of 35.9% YoY, thus pointing towards the fact that its domestic operations grew at a slightly slower rate, thus marginally impacting the overall revenue growth.

  • Operating profits increased 39.4% YoY in 3QFY11. However, operating margins registered a decline due to increase in employee and administration expenses as a percentage of sales.
    Consolidated financial snapshot
      3QFY10  3QFY11  Change  
    Manufacturing expenses  1433         2,307 61.0%
    % of sales  55.7% 55.2%
    Employee Cost  132 342 159.8%
    % of sales  5.1% 8.2%  
    Admin & Mktg expenses  124 299 140.3%
    % of sales  4.8% 7.2%  

  • The company's tax and depreciation expenses saw a sharp rise during the quarter. Despite this, the net profits saw a growth of 45.7% YoY during the quarter on the back of strong operating performance coupled with increase in other income. The company reported other income of Rs 105 m during the quarter as compared to loss in 3QFY10.

What to expect?
At the current price of Rs 246, the stock trades at an earnings multiple of 8.5 times our estimated FY13 consolidated earnings per share. We maintain our view on the stock at current levels.

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