Latin Manharlal Securities Pvt Ltd

Weekender MAY 08, 2015

Index Closing

Weekly

Chg

Weekly

Chg %

Sensex 27105.39 94.08 0.35%

Nifty 8191.5 10.00 0.12%

Auto 18369.63 35.13 0.19%

Bankex 20389.59 -641.29 -3.05%

Cap Goods 16192.78 -326.22 -1.97%

Cons

Durables 9960.11 -417.52 -4.02%

Metal 9952.55 151.58 1.55%

Oil & Gas 9240.02 36.57 0.40%

PSU 7444.12 -121.97 -1.61%

TECH 5885.65 89.74 1.55%

TOP

GAINERS Closing

Weekly

Chg

Weekly

Chg %

Bajaj Auto 2123.05

171.50 8.80%

Hindalco 138.95

10.40 8.09%

HUL 895.2

44.95 5.29%

HCL Tech 925.5

42.45 4.82%

Bharti

Airtel 397.95

17.35 4.55%

TOP

LOSERS Closing

Weekly

Chg

Weekly

Chg %

BOB 145.1 -23.9 -14.14%

PNB 145.7 -14.05 -8.79%

NTPC 142 -8.3 -5.52%

Axis Bank 540.8 -27 -4.76%

ICICI Bank 317 -14.15 -4.27%

Currency

Rates

Price as

on date

USDINR 64.1500 EURINR 71.9350 GBPINR 98.8300 JPYINR 53.4000

Outlook This Week: Apparel and lifestyle accessories firm Numero Uno Clothing Ltd has approached capitalmarkets regulator Sebi to float an initial public offer ( IPO).The proposed public issue comprises fresh issue worth Rs 65 crore. The Lok Sabha passed the Constitutional Amendment Bill that will bring in the goods andservices tax (GST), a single indirect tax that will come in place of a number of central- and state-level taxes and levies. Rupee breaches 64-mark/$ after 20 months, ends at 64.23 Persistent foreign funds outflows,weighed down by lingering concerns over MAT and delay in passage of key tax reform bills in Parliament dragged down the rupee to 20-month lows.

Economic Survey has indicated that the growth rate of GDP at constant market prices can be expected to increase and is likely to be in the range of 8.1-8.5 per cent in 2015-16. The GDP grew at 7.4 per cent in the previous fiscal. Overseas investors have pulled out nearly Rs 10,000 crore from the Indian capital markets in the last four trading sessions amid taxation worries, after infusing huge funds in the first three months of 2015.Foreign Portfolio Investors (FPIs) have withdrawn an estimated Rs 9,170 crore so far in May, as per the latest data from depositories and stock exchanges. New orders for US factory goods recorded their biggest increase in eight months in March, boosted by demand for transportation equipment, but the underlying trend remained weak against the backdrop of a strong dollar. Investors shed Greek bonds and stocks on Tuesday on reports that the International Monetary Fund may cut a funding lifeline to Greece unless its European partners accept more debt writedowns. The EU Commission sharply cut Greek growth and budget forecasts on Tuesday, but expects Athens to record a surplus of 2.1 per cent in 2015. Oil prices rose on Wednesday to hold near 2015 highs, continuing a month-long rally that was supported by a weaker dollar and a disruption to crude exports in Libya. Brent crude for June delivery was 32 cents higher at USD 67.87 a barrel by 0141 GMT, below its 2015 peak of USD 68.40 reached on Tuesday, when the contract ended up USD 1.07. BSE and NSE will introduce seven companies, including CEAT and Bajaj Finance, to the futures and options segment from May 29. Besides, Amara Raja Batteries, Castrol India, Pidilite Industries and Page Industries will also become part of the derivatives segment.

Research Desk Latin Manharlal

Securities Pvt Ltd

2

Commodity

Spot Prices

Price as on

date

Castor seed

(100kg) 3705

Chana

(100kg) 4539.55

Coriander

(100kg) 9680.8

Jeera (30kg) 17689.3

Mustardsee

d (100kg) 3874.45

Soy bean

(100kg) 4216

Economic Events

Date Event Forecast Previous

12th May

India

Industrial

Production

YoY MAR

3.7% 5%

12th May

India

Inflation

Rate

YoY APR

3.65% 5.17%

12th May

India

Manufacturi

ng

Production

YoY MAR

0.33% 5.2%

14th May India WPI

Inflation

YoY APR -0.69% -2.33%

14th May India WPI

Manufacturi

ng YoY APR -0.19%

15th May India

Balance of

Trade APR $ -14.4B $-11.79B

15th May

India Bank

Loan

Growth 2/M

AY 9.80%

Stock Specific news:

Fortis Healthcare 's Singapore-based arm will offload 100 percent stake in RadLink for SGD 111 million (over Rs 530 crore) to Fullerton Healthcare Group. RadLink was acquired in 2012-13 and will divest 100 percent shareholding in RadLink-Asia and its subsidiaries. The deal will be completed by May 12. Brothers Malvinder and Shivinder are now planning to exit their financial services company Religare Enterprises. The current market capitalisation of Religare Enterprises is Rs 6,539.35 crore. Even at today's price, a 51 per cent stake sale will generate at least Rs 3,250 crore. Global names like Bain Capital, Baring Private Equity Asia and even Renuka Ramnath's Multiples are in race and among five or six potential suitors who have bid for the asset. Aditya Birla merges apparel biz to form Rs 5,290cr entity Under the scheme of arrangement approved today by the boards of respective companies, the apparel businesses of group holding company Aditya Birla Nuvo (ABNL) and of another group firm Madura Garments Lifestyle Retail Company Ltd (MGLRCL) would be demerged into listed firm Pantaloons Fashion & Retail Ltd (PFRL). Paytm to partner with Jubliant Foodworks Dominos for offline payment. GMR Infrastructure said its parent firm GMR Holdings has pledged 14.41 percent stake in the company with IL&FS Trust Company (ITCL). Bajaj Auto april sales surge 34% MoM to 3.36L; mkt share at 19% Following a disappointing run over the past several months, Bajaj Auto delivered on its promise that sales would turn up soon, saying it had sold 3.36 lakh vehicles in April, compared to 2.5 lakh in March. Branded jewellers like Gitanjali and Tara tie up with Amazon, Snapdeal to cheaper products sell online items that cost anything between Rs25,000 and Rs40,000, and are opening stores only for high-value products which customers want to touch and feel before buying.

Research Desk Latin Manharlal

Securities Pvt Ltd

3

Private carrier Jet Airways has collaborated with Air Seychelles to offer code-share flights on each other's network. Air Seycehlles, which is the national carrier of the Seychelles, is partly owned by Gulf carrier Etihad Airways, which holds 40 percent stake in the airline. Etihad also holds 24 percent equity in Jet Airways. Merrill Lynch Capital ups stake in Welspun Projs to 7.55%. Prior to acquisition, Merrill Lynch Capital Markets Espana's stake in the company was 3.80%. Amara Raja Batteries Ltd said it is planning to expand its two-wheeler battery capacity to over 22 million per annum in the next two years from current capacity of 11 million. NMDC said Life Insurance Corporation of India ( LIC) has acquired almost 8 crore of its shares or 2.01% stake in the firm worth over Rs 1,116 crore in a market purchase. Post the share purchase, LIC's stake in NMDC has risen to 10.12 % from 8.11%. Global internet solution firm Tata Communications Ltd expects its media and entertainment segment to grow at an annual growth rate of 40 per cent through financial year 2017-18. MEP Infra to replace PC Jeweler in BSE IPO index frm Friday The stock PC Jeweller is excluded on account of completion of two years in the index, as per the index methodology. Tata Motors rights issue, which closed on May 2, was oversubscribed by 1.21 times and the company "collected" an amount of Rs 9,040.56 crore. CCI has approved Reliance Infrastructure 's proposed acquisition of controlling stake in Pipavav Defence and Offshore Engineering in a Rs 2,000-crore deal. Reliance Defence would purchase nearly 18 percent stake from promoter group led by Nikhil Gandhi at Rs 63 per share, amounting to Rs 819 crore, and subsequently make an open offer for an additional 26 percent at Rs 66 apiece, aggregating Rs 1,263.3 crore. Outlook Next week:

The cut in earnings estimates by leading research houses

for Nifty and Sensex earnings for FY16 on the back of

poor results this quarter may have led to basket selling

this week.

Govt’s stance on Retro tax and clampdown on Foreign NGOs, as reported by some media may be withering

foreign investors faith in India. This fall may not sustain

as low levels is seen . However, for long term value

investors these come as an opportunity as the stocks

trade on fair valuations.

Results slated for next-week are: BOB, Havell’s, Apollo Tyres, Ashok Leyland, Dr. Reddy Labs, Union Bank, Emami,

Lupin, MCX, Oriental Bank, Cadilla, JSW Steel, Nestle and

Torrent Pharma.

Research Desk Latin Manharlal

Securities Pvt Ltd

4

Opto Circuits

…for high risk investors

Current Price 20.30

Target

Price 24.50

Stop Loss 18

Upside 20.69% Duration 6-8 months

STOCK DATA

BSE Code 532391

NSE Code INE808B01016

Market Cap (Crores) 491

Face value 10

52 week H/L 18/44.50

Company Overview Opto Circuits India Ltd. is a multinational medical device company headquartered out of Bengaluru, India. The Group companies such as Cardiac Science, Criticare, Eurocor, Mediaid, AMDL and Unetixs Vascular are leaders in vital signs monitors, emergency cardiac care equipment, vascular treatments and sensing technologies.

Opto Circuits (India) Limited manufactures and distributes medical equipment and

interventional devices in more than 150 countries, predominately in North America, Europe

and BRIC. The Company specializes in vital signs monitoring, emergency cardiac care,

vascular treatments and sensing technologies.

Opto Circuits has its manufacturing facilities in USA, India and Malaysia.

Some of the well-known brands marketed by the Company are Criticare Systems, Mediaid,

Unetixs Vascular, Eurocor and Cardiac Science.

The medical device industry was valued at US$ 8 billion in . Opto Circuit’s invasive products market stands at around US$ 8-10 billion with the U.S. making up half its market.

Some of Company's product segments are growing at 7-8% every year. Opto Circuit's market

for non-invasive products is even bigger and stands at about US$ 12-15 billion — and the U.S.

again accounts for about 50% of the market in most product segments. For FY , the Company’s total income from operations fell by . % to Rs. , 8. Cr. as against Rs. 2,399.36 Cr. in FY 2013. For the same period, net profit went down by 76.45 %

to Rs. 90.03 Cr. as against Rs. 382.36 Cr. in FY 2013.

Shareholding Pattern

(31/03/2015)

Category % of equity

Promoters 28.28%

Financial Inst./Banks

1.86% FII’s 15.85%

Public 54.01%

TOTAL 100%

Research Desk Latin Manharlal

Securities Pvt Ltd

5

Public holding more than 1% of the total no. of shares:-

Products:

Financials

During the year 2013-14, Company reported Consolidated Net Revenue of 1471 crores as compared to the previous year’s Consolidated Revenue of 2406 crores. Company reported a Consolidated Profit of 90 crore vis-à-vis a Consolidated Net Profit of 382 crores in FY 2012-13.

The sale of CMD (Cardiac Monitoring division) which was part of Cardiac Science Corporation Inc., USA (a step-down subsidiary of Opto Circuits) resulted in a significant dip in the revenues. One of the other reasons for drop in revenue was tough market conditions & weak economic scenarios prevailing in Europe, Middle East and Far East. An increase in the Material and Freight cost in the US and Europe which could not be passed on to the customers also contributed to this drop in revenues and margins. The Revenues of the standalone entity in Financial Year 2013-14 have seen a dip primarily on account of supply chain disruption in our Vizag facility arising out of political disturbances.

Research Desk Latin Manharlal

Securities Pvt Ltd

6

Opportunities going forward

Working on several new products designed especially for the emerging markets which will contribute significantly to the revenue of Company in the coming years.

Aggressively following up with errant distributors to collect past over dues and also

working on reducing our inventory levels across the globe.

Concerns and Risks to tackle

Low promoter holding at 28.28%

ROCE and ROE are decreasing from last 2 years, but with coming up with new product launches and improvement in economic scenario, these returns would show strength

Not managing its supply chain process leading to higher input costs

Recommendation

Only High risk Investors can buy at CMP of 20.30 with Stop loss of 18 and target price of Rs 24.50 for next 6-8 months.

Research Desk Latin Manharlal

Securities Pvt Ltd

7

BALANCE SHEET (Crores)

201403 201303 201203 201103 201003

SOURCES OF FUNDS :

Share Capital 242.32 242.32 242.32 186.4 182.9

Reserves Total 1986.48 1839.61 1457.01 1180.46 838.29

Equity Share Warrants 0 0 0 0 24.56

Equity Application Money 0 0 0 0 0

Total Shareholders Funds 2228.8 2081.93 1699.33 1366.86 1045.75

Minority Interest 19.64 20.59 18.04 21.89 13.51

Secured Loans 1279.44 1163.49 990.1 795.65 219.23

Unsecured Loans 300.2 290.16 182.22 104.07 13.59

Total Debt 1579.64 1453.65 1172.32 899.72 232.82

Policy Holders Fund 0 0 0 0 0

Other Liabilities 2.07 2.75 2.92 1.92 0

Total Liabilities 3830.15 3558.92 2892.61 2290.39 1292.08

APPLICATION OF FUNDS :

Gross Block 1714.79 1671.02 1596.82 1378.53 594.82

Less: Accumulated Depreciation 605.85 503.38 436.64 310.96 85.31

Less: Impairment of Assets 0 0 0 0 0

Net Block 1108.94 1167.64 1160.18 1067.57 509.51

Lease Adjustment 0 0 0 0 0

Capital Work in Progress 46.56 44.46 42.95 33.96 26.15

Producing Properties 0 0 0 0 0

Investments 0.01 0.01 0.01 0.01 0.28

Current Assets, Loans & Advances

Inventories 789.13 744.3 511.77 432.52 221.22

Sundry Debtors 1727.1 1589.4 846.57 678.42 439.6

Cash and Bank 20.15 43.17 174.31 234.18 122.33

Loans and Advances 529.8 623.12 484.62 417.42 305.38

Total Current Assets 3066.18 3000 2017.27 1762.54 1088.53

Less : Current Liabilities and Provisions

Current Liabilities 460.95 703.53 422.83 464.36 178.47

Provisions 72.87 70.28 215.81 221.55 159.59

Total Current Liabilities 533.82 773.81 638.64 685.91 338.06

Net Current Assets 2532.36 2226.19 1378.62 1076.63 750.47

Miscellaneous Expenses not written off 0 0 0 0 5.86

Deferred Tax Assets 575.68 492.76 461.56 0.02 0

Deferred Tax Liability 504.94 429.08 403.4 23.38 0.19

Net Deferred Tax 70.74 63.68 58.16 -23.36 -0.19

Other Assets 71.54 56.93 252.68 135.58 0

Total Assets 3830.16 3558.91 2892.6 2290.39 1292.08

Contingent Liabilities 810.71 708.51 507.9 167 61.67

Research Desk Latin Manharlal

Securities Pvt Ltd

8

PROFIT AND LOSS (Crores)

201403 (12) 201303 (12) 201203 (12) 201103 (12) 201003 (12)

INCOME :

Sales Turnover 1408.01 2399.35 2356.85 1586.83 1077.58

Excise Duty 0 0 0 0 0

Net Sales 1408.01 2399.35 2356.85 1586.83 1077.58

Other Income 63.32 7.31 13.56 29.16 -7.58

Stock Adjustments -5.53 18.55 21.64 40.99 -0.87

Total Income 1465.8 2425.21 2392.05 1656.98 1069.13

EXPENDITURE :

Raw Materials 684.7 1175.32 1233.51 876.34 586.2

Power & Fuel Cost 5.23 6.43 4.57 2.7 1.21

Employee Cost 158.58 199.69 186.59 110.07 49.71

Other Manufacturing Expenses 97.13 140.01 105.91 56.09 16.42

Selling and Administration Expenses 175.17 287.4 207.01 119.32 49.63

Miscellaneous Expenses 20.13 25.69 24.39 15.96 9.9

Less: Pre-operative Expenses Capitalised 0 0 0 0 0

Total Expenditure 1140.94 1834.55 1761.99 1180.48 713.07

Operating Profit 324.86 590.68 630.06 476.5 356.06

Interest 137.14 109.24 59.2 32.06 38.21

Gross Profit 187.72 481.44 570.86 444.44 317.85

Depreciation 75.7 95.95 54.63 50.8 27.8

Minority Interest (before tax) 0 0 0 0 0

Profit Before Tax 112.02 385.49 516.23 393.64 290.05

Tax 22.42 4.78 26.81 25.32 29.77

Fringe Benefit Tax 0 0 0 0 0

Deferred Tax -0.44 -1.66 -83.98 -0.23 -0.13

Net Profit 90.04 382.36 573.4 368.55 260.41

Minority Interest (after tax) -0.93 2.55 1.52 1.3 0.1

Profit/Loss of Associate Company 0 0 0 0 0

Net Profit after Minority Interest & P/L Asso.Co. 90.97 379.81 571.88 367.25 260.31

Extraordinary Items 5.17 -11.9 -0.67 6.52 -4.06

Adjusted Net Profit 85.8 391.71 572.55 360.73 264.37

Adjst. below Net Profit 0 0 -271.28 12.2 1.41

P & L Balance brought forward 1156.65 801.83 643.51 406.16 255.36

Statutory Appropriations 0 0 0 0 0

Appropriations 0 25 108.79 142.11 110.92

P & L Balance carried down 1247.62 1156.65 835.32 643.5 406.16

Dividend 0 0 72.91 84.35 81.95

Preference Dividend 0 0 0 0 0

EPS after Minority Interest (Unit Curr.) 3.75 15.67 23.11 18.95 13.47

EPS after Minority Interest (Adj) (Unit Curr.) 3.75 15.67 23.11 14.58 10.36

Book Value (Adj) (Unit Curr.) 91.98 85.92 70.13 56.41 42.95

Dividend Per Share Adj.(Rs) 0 0 3 3.46 3.08

Research Desk Latin Manharlal

Securities Pvt Ltd

9

CASH FLOW (Crores)

201403 201303 201203 201103 201003

Cash Flow Summary

Cash and Cash Equivalents at Beginning of the year 2.16 45.6 117.46 110.83 80.57

Net Cash from Operating Activities -15.72 -92.94 -29.5 118.02 94.51

Net Cash Used in Investing Activities -0.22 -19.18 145.7 -572.02 -54.13

Net Cash Used in Financing Activities 16.09 68.68 -188.06 460.63 -10.11

Net Inc/(Dec) in Cash and Cash Equivalent 0.15 -43.44 -71.86 6.63 30.27

Cash and Cash Equivalents at End of the year 2.31 2.16 45.6 117.46 110.84

RATIO’s

201403 201303 201203 201103 201003

Key Ratios

Debt-Equity Ratio 0.57 0.55 0.61 0.48 0.56

Long Term Debt-Equity Ratio 0 0 0.07 0.12 0.3

Current Ratio 1.96 1.86 1.36 1.29 1.72

Turnover Ratios

Fixed Assets 1.73 5.56 6.77 6.26 6.75

Inventory 0.66 2.23 2.62 3.35 4.39

Debtors 0.44 1.66 2.76 2.82 2.12

Total Asset Turnover Ratio 0.11 0.34 0.37 0.42 0.48

Interest Cover Ratio 1.97 12.13 7.49 10.91 5.74

PBIDTM (%) 43.09 39.11 41.91 46.07 42.66

PBITM (%) 40.08 38.17 41 45.09 42

PBDTM (%) 22.7 35.97 36.44 41.94 35.34

CPM (%) 19.06 35.42 35.96 41.49 31.84

APATM (%) 16.04 34.47 35.05 40.51 31.19

ROCE (%) 4.53 12.9 15.02 19.15 20.11

RONW (%) 2.86 18.07 20.63 25.4 23.28

Payout (%) 0 0 32.6 36.47 61.39

Research Desk Latin Manharlal

Securities Pvt Ltd

10

CHART:-

Terms used :

FCF : Free cash flow TTM : Trailing twelve months RONW : Return on net worth ROE : Return on Equity ROCE : Return on Capital Employed EV/EBIDTA = Enterprise value / Earnings before interest, depreciation, tax and amortization P/E = Price to earnings ratio EPS = Earnings per share BV = Book value PBT = Profit before tax PAT = Profit after tax OPM = Operating profit margin

Research Desk Latin Manharlal

Securities Pvt Ltd

11

Disclosures:

(a) The research analyst or research entity or his/their associates or his/their relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company or any financial interest in the subject company

(b) The research analyst or research entity or his/their associates or his/their relatives do not have any other material conflict of interest at the time of publication of the research report or at the time of public appearance

(c) The research analyst or research entity or its associates have not received any compensation for investment banking or merchant banking or brokerage services nor received any compensation for products or services from the subject company in the past twelve months

(d) The research analyst or research entity or its associates have not received any other benefits from the subject company or third party in connection with the research report

(e) The subject company is not or was not a client during twelve months preceding the date of distribution of the research report and the types of services provided by the research analyst or research entity or his/their associates or his/their relatives

(f) The research analyst has not served as an officer, director or employee of the subject company

(g) The research analyst or research entity has not been engaged in market making activity for the

subject company

Research Desk Latin Manharlal

Securities Pvt Ltd

12

THANK YOU

Disclaimer:- This report has been prepared by Latin Manharlal Securities Pvt Ltd . The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Latin Manharlal Securities Pvt Ltd. may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. Latin Manharlal Securities Pvt Ltd., its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. Neither Latin manharlal Securities Pvt Ltd. nor any of its employees shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material.

Registered Office: 124 Viraj, S,V.Road, Khar (W), Mumbai 400 052. Tel. (022) 4082 4082, Fax (022) 2649 7997. research@lmspl.com www.latinmanharlal.com, LMSPL Network: Fort, Mahalaxmi, Parel, Bandra, Santacruz, Vile Parle, Andheri, Malad, Kandivili, Borivali, Bhayender,

Ghatkopar, Mulund, Chunabhatti, Jacob Circle, Masjid Bunder, Cotton Green, Thane, Bhiwandi, Panvel, Pune, Sholapur, Nasik, Malegoan, Ahmednagar, Aurangabad, Akola, Mahekar, Nagpur, Surat, Karjan(Baroda), Khambat, Ahmedabad, Rajkot, Surendranagar, Porbandar, Amreli, Bharuch, Anand, Chennai, Vishakhapatnam, Vizianagaram, Palasa, Kakinada, Karnal, Kolkatta, Bhubhaneshwar, Hyderabad, Bangalore, Jafrabad, Chital, Kodinar, Keshod, Gondal, Haryana, Srikakulam, Mehkar (Buldhana, Jamnagar, Bangalore, Jodhpur, Jalgaon, Malkangiri (Orissa), Karimnagar Dist. (Andhra Pradesh).