Recommendation: Buy
CMP = Rs 338
Price target: Rs 460
Key points:
- Opto Circuits India’s (Opto) non-invasive business is expected to grow at a compounded annual growth rate (CAGR) of 39.5% over FY2007-10E to Rs 550.7 crore on the back of rising demand for its sensors and patient monitoring systems, coupled with an increasing market penetration and innovative new launches.
- The invasive business would be driven by the increasing acceptance of the company's stents due to superior technology and better pricing. Further, the growing revenues from DIOR in
- Opto has recently completed its $70 million acquisition of Criticre Systems (Criticare), a US-based publicly listed company specialising in vital signs and gas monitoring instruments. We estimate the Criticare acquisition to generate incremental earnings of Rs 0.60 per share in FY2009E and Rs1.80 per share in FY2010E. We will incorporate the impact of the acquisition after the announcement of Opto's FY2008 results.
- Opto's fully diluted earnings (without Critcare) would grow at a CAGR of 35% over FY2007-10E on the back of a 57% CAGR in revenues. Opto is trading at attractive valuations of 16.9x FY2009E fully diluted earnings and 11.3x FY2010E fully diluted earnings.
- I maintain Buy recommendation on Opto with a price target of Rs 460 over next 6-7 months.
