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Opto Circuits: Maintaining momentum - Views on News from Equitymaster
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Opto Circuits: Maintaining momentum
Jul 17, 2009

Performance summary
  • Consolidated topline grew by 29.9% YoY during the quarter led by new product introductions and market share gains.
  • Operating profits grows by 37.8% YoY on account of lower operating costs, thus enabling EBITDA margins to expand by 1.9% during the quarter.
  • Bottomline grows by 31.8% YoY despite the fall in other income and higher depreciation charges.


Consolidated financial snapshot
(Rs m) 1QFY09 1QFY10 Change
Net sales 1,774 2,304 29.9%
Expenditure 1,215 1,533 26.3%
Operating profit (EBDITA) 559 770 37.8%
EBDITA margin (%) 31.5% 33.4%  
Other income 22 4 -80.0%
Interest (net) 109 135 23.6%
Depreciation 13 44 227.7%
Profit before tax 459 596 29.9%
Exceptional items (5) -  
Tax 4 3 -29.8%
Profit after tax/(loss) 450 593 31.8%
Net profit margin (%) 25.4% 25.7%  
Net profit/(loss) after minority interest 449 593 32.0%
No. of shares (m) 94.2 160.1  
Diluted earnings per share (Rs)*   13.9  
Price to earnings ratio (x)**   11.9  

What has driven performance in 1QFY10?
  • While the standalone topline of the company grew by 19% YoY in 1QFY10, the consolidated topline grew by 29.9% YoY during the quarter, leading us to conclude that the growth in international subsidiaries was higher. Also, the fact that the company had acquired some businesses in the latter part of the last fiscal seems to have given a boost to its topline growth. The company had introduced several new products and registered a gain in its market share during the quarter. While non-invasive segment accounted for 78% of the total revenues, the invasive and other business segments accounted for the rest.

  • During the quarter, Opto Circuits’ international subsidiary Mediaid received FDA approval for key vital sign monitoring products. It also received approval for marketing and sale of US FDA-approved Pulse Oximetry (SPO2) products (Patient Monitors & Sensors) in Brazil and surrounding geographies. Criticare, another international subsidiary had received US FDA approval for certain products that enabled their integration and also marketing & sales to OEM manufacturers across the globe. All these developments seemed to have augured well for the company during the quarter.

  • On the operating performance front, operating expenses grew by 26.3% YoY, lower as compared to topline on the back of significant reduction in administration & marketing cost (as % of sales) during the quarter. This enabled operating margins to expand by 1.9% to 33.4%. However, had there been no increase in the manufacturing expenses and staff costs (as % sales), operating margins would have been even greater during the quarter

    Cost table
    (Rs m) 1QFY09 1QFY10 Change
    Manufacturing expenses 985 1,306 32.6%
    % sales 55.5% 56.7%  
    Staff cost 80 125 56.7%
    % sales 4.5% 5.4%  
    Adminstration and Marketing 150 102 -31.7%
    % sales 8.5% 4.4%  

  • Bottomline growth at 31.8% YoY came in lower as compared to operating profits mainly on account of more than threefold jump in depreciation charges and significant fall in other income during the quarter. However, lower growth in interest charges and fall in tax expenses impacted the bottomline positively during the quarter. The net profit after minority interest grew by 32% YoY in1QFY10.

What to expect?
At the current price of Rs 166, the stock is trading at a multiple of 9.1x the company’s expected FY11 earnings estimate. The company has outperformed our estimates by 4% each on topline and bottomline front. We continue to remain positive on the stock.

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