>OPTO CIRCUITS: 1QFY13 Result Update

WHAT’S CHANGED…
PRICE TARGET………………………………………………………………Unchanged
EPS (FY12E)……………………………………………...Changed from | 22.9 to | 24.2
EPS (FY13E)…………………………………………………………………Unchanged
RATING……………………………………………………………………...Unchanged

Performance intact amid rating concerns.…
Opto Circuits’ Q1FY13 results were above our expectations. Revenues grew 36% YoY to | 715 crore, higher than our estimates of | 643 crore on the back of 1) 38.3% growth in the medical equipment & consumables segment, 2) 34% growth in the interventional devices segment and 3) favourable currency. After a sharp decline in Q4FY12, EBITDA margins normalised during the quarter. On a YoY basis, however, EBITDA margins declined 30 bps to 27.9%, higher than our estimates of 26.5%. The effective tax rate increased by 440 bps to 9.1%, which restricted net profit growth to 26.3% at | 147.0 crore. We are maintaining our BUY rating on the stock, although we will keep a watch on Crisil’s credit rating due in September amid the Icra rating downgrade confusion.

Non-invasive segment grows 18% on constant currency basis
Revenues from the non-invasive segment grew 38% to | 583.5 crore on the back of new tenders, resumption of distribution of Powerheart AEDs in Japan and favourable currency. The invasive segment also registered healthy growth of 34% YoY to | 126 crore on the back of improved presence in geographies like China & Indonesia and favourable currency.

My Sense Heart device launch to be in current fiscal
The company is planning to launch a wearable Holter cardiac monitor MySense Heart device in the US market by the end of Q3FY13, for which it had received USFDA approval. It is also in discussions with some retail chains to market this product in the US. It is planning to set up a back end office, which is used for analysing the data from those machines.

Concerns regarding WC, ratings likely to wane, remain lightweight
We expect sales, EBITDA and PAT to grow at a CAGR of 22%, 20% and 18% (adjusted net profit base for FY12), respectively, in FY12-14E. Improvement in working capital management, which was visible in Q4, was reflected in Q1 as well, vindicating the progress on that front. New
product launches in various geographies are expected to keep the growth momentum going. The shift of production to Vishakhapatnam and Malaysia is expected to compensate the pressure on margins on account of R&D charges to P&L henceforth. We have ascribed a value of | 256, based on 9x FY14E EPS of | 28.5. We maintain our BUY recommendation with a lightweight bias.


RISH TRADER