Opto Circuits (India) - Better Than Expected Show

Opto Circuits (India) is a leading developer and manufacturer of medical equipments and interventional devices for the global markets. The scrip of Opto Circuit has witnessed a setback on the bourses with a continuous decline since the past one month. The stock has already lost around 40% of the market cap during this period. 

There were certain rumors in the markets like shares being pledged by the promoters. No wonder the scrip witnessed a significant downfall. However, the promoters later have clarified that no shares have been pledged and the same has also emerged from the December 2012 quarterly results of the company. Rather, even the consolidated results have been above the street expectations. 

For the December 2012 quarter, the consolidated sales stood at Rs 619.25 crore as against Rs 611.29 crore in the December 2011 quarter. The bottomline performance was also good. Here, the net profit stood at Rs 114.51 crore as against Rs 125.42 crore. Though the profitability has declined during the quarter, the performance of the company has been better than the street estimates. 

As for the 9MFY13, the topline has increased by 14.60% to Rs 1940 crore and the bottomline has increased by 2% to Rs 367.5 crore. Regarding the segment contribution, the medical equipment contributed 80.50% to the topline and interventional devices contributed around 19%. A major contribution to the bottomline was by medical equipments. 

On the operational front, the finance cost of the company has increased substantially to Rs 20.30 crore as against Rs 16.80 crore in December 2011. We are of the opinion that the company is expected to put up a good show in the March 2013 quarter, resulting in a strong growth for FY13 as a whole. 

On the valuation front, the scrip is trading at just 7x of its trailing four quarter earnings. We recommend investors to hold the counter.