OPTO CIRCUITS - RECESSION PROOF

Opto Circuits has been a Consistent Performer since its Public Issue in 2000. It has never faltered and has an uncanny knack of delivering good performance quarter after quarter.
Opto Circuit is a leading manufacturer of medical equipments like digital thermometers, cholesterol monitors, cardiac stents etc. The company came out with excellent results for September quarter with its revenues growing by more than 75% from around Rs 125 crore to Rs 217 crore and net profits have also grown by 66% from around Rs 34 crore to Rs 57 crore. The company has been able to expand its EBITDA margins also by 230 bps points on the back of strong operational efficiency and integration synergies.

In the recent past, the company had acquired two companies namely Eurocor of Germany and Criticare in US and both these acquisitions have given the company tremendous advantage to reach different geographical areas and beat the global slowdown with its diversified product basket.
Over the past few years, Opto has created strategic and shareholder-value by focusing on inorganic opportunity for growth, be it in the Advanced Micronic Devices acquisition in ’01, Palco Labs and the thermometer division of HUL in ’02, Mediaid in ’03, EuroCor in ’05, or the recent Criticare Systems acquisition in ’08. This shows the management’s focus on value creation.
The management in a recent outlook to Leading Brokerage said "Invasive segment to continue to grow at 100% for the next couple of years despite global economic slowdown; the business is fairly insulated from global economic slowdown because OCIL primarily operates in the critical care industry; non-invasive business to remain solid and growing led by new products launches; criticare provides significant growth opportunities in the US markets and is expected to generate revenues of US45-50mn in FY09 with significant margin improvement."


COMMENTS :
Opto operates in a High Margin Business.
Opto is in a Recession Proof Business.
Opto continues to face very little new competiiton.
Opto continues to grow aggressively through acquistions.
Opto will benefit from Falling Interest Rates as it requires High Working Capital Requirement.
Opto has a strong Distribution Network across 36 countries.

Opto Circuits has been one of those Rare Companies who believe in Distributing Wealth to its Shareholders. It has given Bonus and Dividend for last 8 year consective years.
After the recent correction in stock price, the valuations offer a good buying opportunity. Opto has traded at a premium to the market due to high growth, healthy margins and upside from potential acquisitions. But with the recent market fall and overhang of large ownership by FIIs, the stock price has corrected more than warranted , making it more attractive. BUY

TARGETS :
Vikas Sethi, MD of Sethi Finmart is of the view that Opto Circuit can touch Rs.250
Kotak Securities has maintained its Buy rating on Opto Circuits with a target price of Rs 212.
Emkay Global Financial Services has maintained its buy rating on Opto Circuits with a target price of Rs 432.
India Infoline maintained a BUY on Opto in its August 2008 Report with a Price Target of Rs.509.
Sharekhan has a target of 453 in its Dec 2008 report.

Finally, it would be apt to recall OPTO CIRCUITS had made it to the list of FORBES list of 200 Top companies under $1billion in Asia.

Most brokerages have an average EPS estimation for Opto at 15. Even at a conservative PE of 10, the minimum price target should be 150.

Opto Circuits is among my Top Picks for 2009

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