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Opto Circuits: A heartening performance - Views on News from Equitymaster

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Opto Circuits: A heartening performance

Jun 18, 2009

Performance summary
  • Consolidated topline grows an impressive 75% YoY for the full year led by its recent acquisitions
  • Operating margins witness an expansion of 240 basis points (2.4%) as costs grow at a slightly lower rate than the topline
  • Bottomline growth comes in at 60% YoY for the full year as higher interest and depreciation charges take some sheen off the operating performance
  • Consolidated profits for the fourth quarter grow 60% YoY on the back of a 77% YoY growth in topline
  • Announces a dividend of Rs 4 per share subject to the approval of the board (Dividend yield of 2.5%)

Consolidated financial snapshot
(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
Net sales 1,205 2,131 76.9% 4,681 8,185 74.9%
Expenditure 853 1,398 63.8% 3,309 5,594 69.1%
Operating profit (EBDITA) 351 733 108.6% 1,372 2,591 88.9%
EBDITA margin (%) 29.2% 34.4%   29.3% 31.7%  
Other income 109 136 24.2% 171 288 68.6%
Interest (net) 36 156 337.3% 109 537 394.2%
Depreciation 41 73 80.3% 63 138 119.7%
Profit before tax 385 640 66.4% 1,371 2,204 60.7%
Exceptional items (9) (28.0)   (20) (33)  
Tax 28 57 104.7% 38 73 89.4%
Profit after tax/(loss) 348 555 59.5% 1,313 2,098 59.8%
Net profit margin (%) 28.9% 26.0%   28.1% 25.6%  
Net profit/(loss) after minority interest 342 554 61.9% 1,307 2,094 60.3%
No. of shares (m)       94.2 161.5  
Diluted earnings per share (Rs)*         12.97  
Price to earnings ratio (x)**         12.6  
(* annualised, ** on trailing twelve months earnings)

What has driven performance in FY09?
  • While the standalone topline of the company grew by 22%YoY in FY09, the consolidated topline grew by robust 75% YoY during the fiscal, thus pointing towards a stellar performance of its international businesses. The fact that it acquired some new businesses in the fiscal under consideration also helped give its topline a big boost. The non invasive segment accounted for around 75%, whereas invasive and other segments contributed 23% and 2% of the consolidated revenues during the year.

  • On the domestic front, the company received DCGI approval for one of its invasive products. Its international subsidiary Criticare Systems launched two new patient monitors - eQuality and Ncompass which received approval for sale in USA and Europe during the fiscal. Criticare had also received US FDA approval for pulse oximeter (SpO2) module. This enabled the integration of the module into CSI monitors and marketing & sale of the product to OEM manufacturers across the globe. All these developments have augured well for the company during the fiscal.

  • On the operating performance front, operating expenses grew by 69.1% YoY, lower as compared to topline on the back of reduced manufacturing, staff and administration & marketing cost (as % of sales) during the fiscal. This enabled operating margins to expand by 2.4% to 31.7%.

    Cost break-up…
    (Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
    Manufacturing expenses 729 1,209 65.8% 2,753 4,625 68.0%
    % sales 60.5% 56.7%   58.8% 56.5%  
    Staff cost 64 121 90.3% 211 400 89.6%
    % sales 5.3% 5.7%   4.5% 4.9%  
    Adminstration and Marketing 61 68 11.8% 344.71 569 65.1%
    % sales 5.0% 3.2%   7.4% 7.0%  

  • The bottomline of company grew by around 59.8% YoY, lower than the 89% growth in operating profits. This was mainly on account of higher interest and depreciation charges during the fiscal. The net profit after minority interest grew by around 60.3% YoY.

What to expect?
At the current price of Rs 163, the stock is trading at a multiple of 9x the company’s expected FY11 earnings estimate. The company has outperformed our estimates by 15% on topline front and by 19% on the bottomline front. While we continue remain positive on the stock, we will soon come out with an updated target price after an interaction with the management.

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