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Opto Circuits: Optimum performance - Views on News from Equitymaster
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Opto Circuits: Optimum performance
Oct 30, 2009

Performance summary
  • Consolidated topline grew by 17.8% YoY led by both international subsidiaries and domestic markets.
  • Operating profits grew by 31.5% YoY higher than the topline mainly due to lower operating costs, resulting in expansion of EBITDA margins by 3.7% YoY to 35.5% in 2QFY10.
  • Consolidated net profits grew by 18% YoY despite higher depreciation and tax out go.
  • Half yearly consolidated net profits grew by 24.1% YoY on the back of 23.3% YoY growth in topline.


Consolidated financial snapshot
(Rs m) 2QFY09 2QFY10 Change 1HFY09 1HFY10 Change
Net sales 2,170 2,557 17.8% 3,944 4,861 23.3%
Expenditure 1,480 1,650 11.5% 2,694 3,183 18.1%
Operating profit (EBDITA) 690 908 31.5% 1,250 1,678 34.3%
EBDITA margin (%) 31.8% 35.5%   31.7% 34.5%  
Other income 34 3 -91.0% 56 7 -86.7%
Interest (net) 126 104 -17.2% 235 239 1.8%
Depreciation 24 69 184.2% 38 114 199.6%
Profit before tax 574 737 28.4% 1,033 1,333 29.1%
Exceptional items (0.3) (0.3)   (5) (0.3)  
Tax 6 67 972.5% 10 70 570.8%
Profit after tax/(loss) 567 669 18.0% 1,017 1,262 24.1%
Net profit margin (%) 26.1% 26.2%   25.8% 26.0%  
Net profit/(loss) after minority interest 567 669 18.0% 1,017 1,261 24.0%
No. of shares (m)       94.2 182.9  
Diluted earnings per share (Rs)*         12.75  
Price to earnings ratio (x)**         15.9  
(* annualised, ** on trailing twelve months earnings)

What has driven performance in 2QFY10?
  • While the standalone topline of the company grew by 15.8% YoY in 2QFY10, the consolidated topline grew by 17.8% YoY during the quarter, pointing towards the fact 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. While non-invasive segment accounted for 79% of the total revenues, the invasive and other business segments accounted for the rest.

  • On the operating front, operating profits grew by 31.5% YoY higher than the topline on the back of lower operating costs during the quarter. Manufacturing expenses and Administration & marketing costs (as a % of sales) declined during the quarter. Hence EBITDA margins grew from 31.8% in 2QFY09 to 35.5% in 2QFY10.

    Cost break-up…
    (Rs m) 2QFY09 2QFY10 Change 1HFY09 1HFY10 Change
    Manufacturing expenses 1,207 1,375 13.9% 2,192 2,681 22.3%
    % sales 55.6% 53.8%   55.6% 55.2%  
    Staff cost 98 125 28.0% 177 250 40.9%
    % sales 4.5% 4.9%   4.5% 5.1%  
    Adminstration and Marketing 174 149 -14.4% 324.37 252 -22.4%
    % sales 8.0% 5.8%   8.2% 5.2%  

  • Consolidated net profits grew by 18% YoY, lower than operating profits. This was mainly on account of significant fall in other income coupled with higher depreciation and tax outgo. However, decline in interest costs due to retirement of some of the long term debt has positively impacted the bottomline. It may be noted that Opto Circuits had raised around Rs 4 bn by placing 21.43 m shares as QIPs. The proceeds from the same were to be used for retirement of long term debt and growth prospects of the company.

What to expect?
At the current price of Rs 189, the stock is trading at a multiple of 11.4x the company’s expected FY11 earnings estimate. The company has outperformed our estimates by 4% on the bottomline front, while the topline growth has been nearly in line with our projections. We continue to remain positive on the stock.

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