OPTO CIRCUITS (INDIA) LTD.- IS IT GOING TO MAKE UPPER CIRCUITS! WHEN AND WHY?

Company Name: Opto Circuits (India) Ltd.

Industry: Meditech (Medical Technologies)

Sector: Hospitals & Medical Services

CMP NSE: 9.95

CMP BSE: 9.96

It was the year 2012, the month Aug and the date 17. Motilal Oswal Securities have given a neutral rating to ‘Opto Circuits (India) Ltd. The target price was Rs.173 at the then market price of Rs.147.55. It was the call given after the knowing  fact that the  balance sheet was under the stress and indicating its negative future cash flows. That’s what is called,  the power of goodwill, Opto Circuits (India) Ltd., has had on its records.

Opto Circuits (India) Ltd. – A Victorious Beginning

This 1700 Crore company, Opto Circuits (India) Ltd, started its journey in 1992, as a manufacturer of Sensors. These Sensors as a peripheral components were supplied to the large scale medical equipment manufacturers. Since from then the company has been operating under two segments – The health Care and Information technology. The motto was and is clear – Guaranteed Quality And Innovation.

‘Products and Business’ – The Brand of Quality Assurance

Opto Circuits (India) Ltd., is a multinational medical device company. It designs, develops, manufactures, markets and distributes a range of medical products that are used by healthcare establishments in more than 180 countries. The company specializes in vital signs monitoring, vascular treatments, emergency cardiac care and sensing technologies.

Employees of 'Opto Circuits (india) Ltd.

MANUFACTURING UNIT IN INDIA – A COST EFFECTIVE PROCEDURE

Their other products include optical sensor, security systems, medical electronics and chip-on-board assemblies. These high quality peripheral products are provided by them for many reputed companies around the globe.  All are high in demand.

Proved Marketing Expertise

Apart from manufacturing, OCIT has an efficient marketing wing too. Highly reputed brands like MED Aid, Critical Care Systems, Euro care, Unetixs and Cardiac Science are marketed by Opto Circuits. All these are, USFDA listed and CE marked products and gained reputation in a very short span of time.

List of Prestigious Awards – A Symbol of Repute

If, bagging a single award is a hallmark of purity and prestige  for any business, what we can say about the list of awards that ‘Opto Circuits (India) Ltd., has in its basket?!!!
  • Annual Export Award (2011)
  • Best Performer I Electronics (2007 – 2008) & (2008 – 2009)
  • Overall Best Performance in VSEZ (2009 – 2010)
  • Forbes’ 200 ‘Best Under a Billion Asian Companies (For 2011der)

Why, Dr. Vinod Ramnani, CMD, Opto Circuits (India) Won the Prestigious ‘NextGen Entrepreneur of the Year Award?

For methodically moving up the value chain from non-invasive medical products to high-tech branded devices. For building a research-driven cross-border organization.

These are, a very few of very renowned awards that Opto Circuits India has bagged. There are many others too, try to add here asap.

But Why the Free-Fall

Apart from  such an astonishing and winning history, the stock value has been falling from its all time high of 262 to the recent all time low of Rs.8.12 is a matter of big concern. Sometimes one small (wrong) aggressive step may lead to destruction. That’s what happened in the case of ‘Opto Circuits India Ltd.”. Aggressive expansion. This is the common mistake done by many businesses that led to their devastation. That’s what happened in the case of Opto.

Since from 2oo1 Mr. Romania started to acquire many small and big companies in India, Europe and United States. Paid up sums were very huge. As a result, the Bangalore based and headquartered Opto Circuits India Ltd., turned in to a fairly formidable healthcare products company. The profits that were generated were distributed back to the investors in the range of 30% -40%.

Mr. Ramnani, supposed to stop there itself. But he couldn’t. In the year 2010 he spent $60 million towards 3 acquisitions, which is, a quarter of the company’s $245 million annual revenue. This, finally anyway, led to a huge fall in the stock price from Rs.222.91 in 2012 Feb’ 22nd to 143.35 in June 2012. And, the company couldn’t digest the acquisitions, and the fall continued to the year 2013 to the recent low of Rs. 8.1 on Feb’11, 2016.

Fundamental Analysis

Pros

Current Asset Base

Total current Assets of around Rs. 1700 Crores, against the total equity share capital of Rs. 242.32 Crores is a very good concern and safety net for its investors.

Book value

The current book value of Rs.69.67 against the Current Market Price of  9.96 is saying that it’s a value pick and just buy for a long hold.

Cons

EPS

Its current Zero EPS is not a big concern, once the company receives all the benefits and seed capital for its proper functioning. Once the business picks up, the EPs starts to appear and grow quarter to quarter.

Contingent Liabilities

These a contingent liabilities figure on the balance sheet. An around Rs 689. 95 Crores of contingent liabilities, the company has to overcome in the future. For a well established business like OCI, this number is not so big. I have a hope and trust in the company’s return-to-back future prospects.

Technical Analysis

1 year technical chart of Opto Circuits (India) Ltd.

A READY TO WIN OPTO CIRCUITS INDIA LTD. CHART

As a technical analyst I’m sure that the chart is on its bullish trend. If not so promptly, but will move forward very soon.

Why I Recommend To Buy

PMO Push – A Great Hope for Its Future Performance

After PMO push, Dept of Pharmaceuticals fast tracks formulation of medical devices policy

In order to attract FDIs, The Prime Ministers Office has been pushing the ‘Department of Pharmaceuticals’ to fast tract the ‘Medical Devices Policy’. In a meeting convened by the Prime Minister, this issue has been discussed in detail. According to the department of Pharmaceuticals (DoP), the work on this policy has been expedited and will be released soon.

India imports its 80% of its medical device requirements. The police assumed much significance in this regard too.

According to sources, there is an understanding that a robust medical devices policy is required to help realize the full benefit of the relaxation of the FDI policy. FDI up to 100 per cent through the automatic route is permitted for the manufacturing of medical devices in the country

Along with Opto Circuits, the other companies engaged in manufacturing of medical devices include Siemens, Poly Medicure and BPL. There is a need for FDI in the sector as the domestic medical device industry is fragmented into small and medium enterprises and primarily manufactures products such as disposables. The draft National Medical Device Policy, 2015, had proposed incentives for both new and existing medical device firms. It had asked for interest subsidy to MSMEs, concessional power tariff, seed capital, viability gap funding, tax benefits to the sector, minimum or zero duty on raw materials and incentives for exports.

*** There was an order of Rs.91 Crores, from PHILIPs Health care, in December 2016, for the supply of various Medical Devices. And, this will definitely strengthen the business in future. A sure-shot hope.

– All these are my concerned points about the business, that made me to suggest to buy this value pick for your long-term portfolio. The rest is all your will and wish.

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Thank you for reading. Happy investing!

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Certified Financial Planner And Stock Analyst