Opto Circuits is an Indian multinationals that designs and manufactures a range of medical devices and products used by healthcare establishments in 150 countries. Past acquisitions will contribute handsomely to the top and the bottom lines in coming years. The company is joining hands with foreign firms to extend its geographical reach.
Stock markets are in turmoil as the Indian economy is in a shambles. Strong headwinds from all directions – foreign as well as domestic, political as well as economic – have battered the market sentiment. Investors, having lost lot of money if not their shirts, are confused and undecided about what to do in these disturbing circumstances. Most of the blue chips and favoured stocks are going abegging at unthinkably low prices and the tragedy is no one knows how much more they will fall. There are no signs of any miracle as yet. To select Fortune Scrip in this environment is indeed a tough job. But viewed in the long-term perspective, we choose Opto Circuits India as the Fortune Scrip for this fortnight.
Opto Circuits is an Indian multinational engaged in designing, developing and manufacturing a range of medical devices and products used by healthcare establishments in more than 150 countries.
Based in Bangalore, the company has facilities and offices in North America, Europe and Asia. The company operates in both invasive and non-invasive segments and specializes in cardiac and vital signs monitoring, emergency cardiac care, vascular treatments and sensing technologies.
The company has been growing from strength to strength financially. During the last six years, its sales turnover has gone up steadily from Rs. 116 crore in 2005-06 to Rs. 401 crore in 2008-09 and further to Rs. 603 crore in 2010-11, with profit at net level shooting up four fold from Rs. 35 crore in 2006-07 to Rs. 140 crore in 2008-09 and further to Rs. 244 crore in the fiscal 2011. The company’s financial position is sound with reserves at the end of March 2011 standing at Rs. 1180 crore, almost six times its equity capital and that too after a 7:10 bonus issue in 2008. This is a regularly dividend paying company, the rate for the last two years being 45 per cent.
But we have picked up this company as the Fortune Scrip for the following five reasons. In fact, the company is at an inflexion point.
The company has been growing mainly inorganically. During the last few years, it has acquired several companies including AMDL, Medi Aid, Jolt Acquisition, Criticare, Eurocor, Cardiac Science Corporation, Unetixs Vasuclar Inc. and N.S. Remedies among others. These acquisitions have enabled the company to deliver strong revenue and earnings growth over the last few years and consistently maintain high return ratios. As a result, the consolidated sales for the fiscal 2010 crossed Rs. 1000-crore mark and in the fiscal 2011, exceeded Rs. 1500-crore level. In the current fiscal, it is bound to cross Rs. 2000-crore mark and in the next year (fiscal 2013) it is sure to reach Rs. 2500-crore milestone. What is more, the company has set the target of Rs. 5000 crore for the fiscal year 2014-15.
Non-invasive business which accounts for over 83 per cent of the company’s revenues is all set to drive the company’s growth in the near future. The company plans to launch a new product every six months over the next 2-3 years, most of them targeted towards emerging markets.
As made-in-India products are not accepted in certain overseas markets, the company is expanding its production capacity at its Malaysia plant to cater to increasing demand for its products in those markets. The non-invasive business segment is expected to grow at 32 per cent CAGR over next 3 years.
The company is entering into strategic arrangements with companies in various countries to expand its business. It has entered into an exclusive sales agreement with Omron Healthcare in Japan.
The company is planning a foray into the US market but it is getting delayed on account of financial constraints and regulatory bottlenecks. The company is now looking for strategic partnerships to fast-track its entry into the US market. It has entered into a joint venture with Mycell in US in order to share technology as well as to capitalize on its marketing strength. The company is now looking for more partnerships/alliances to establish and gain prominence in the US market. The entry into the US market will give a big boost to the company’s invasive segment.
Of course, the share price of the face value of Rs. 10 has come down from Rs. 310 to around Rs. 200 in view of the depressed market sentiment in the wake of the Eurozone financial crisis abroad and governance paralysis at home. One should not be surprised if the price falls further to Rs. 175-185 range. But we are sure the price will shoot up to over Rs. 300 within the next 2 to 3 years.
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