Buy Opto Circuits for target Rs 460: Sharekhan
Sharekhan has initiated 'buy' on Opto Circuits for a price target of Rs 460, an upside of 36 per cent from the current levels.
By INDIATIMES NEWS NETWORK |
MUMBAI: Sharekhan has initiated ���buy��� on Opto Circuits for a price target of Rs 460, an upside of 36 per cent from the current levels. The company���s non-invasive business is expected to grow at a compounded annual growth rate of 39.5 per cent 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 Europe and the semi-regulated markets due to limited competition would also fuel the growth of the invasive segment. Sharekhan expects the invasive segment (EuroCor) to contribute 43 per cent to the company's total revenues by 2010.
Opto has recently completed its $70 million acquisition of Criticre Systems, a US-based publicly listed company specialising in vital signs and gas monitoring instruments. The brokerage estimates the Criticare acquisition to generate incremental earnings of Rs 0.60 per share in FY2009E and Rs 1.80 per share in FY2010E.
Sharekhan expects Opto's fully diluted earnings (without Critcare) to grow at a CAGR of 35 per cent over FY2007-10E on the back of a 57 per cent CAGR in revenues. The brokerage estimates earnings of Rs 20.0 per share in FY2009E and Rs 29.9 per share in FY2010E.
Sharekhan has valued the stock using the dividend discount model and the P/E mutiple, arriving at price targets of Rs 453 and Rs 470 per share respectively. Using the average of the two, the brokerage has fixed price target at Rs 460 per share.
Opto is trading at attractive valuations of 16.9x FY2009E fully diluted earnings and 11.3x FY2010E fully diluted earnings. Sharekhan���s current estimate do not incorporate the Criticare acquisition, which could yield incremental earnings of Rs 1.8 per share in FY2010E, implying an upside of Rs 28-30 per share to the target price.
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 Europe and the semi-regulated markets due to limited competition would also fuel the growth of the invasive segment. Sharekhan expects the invasive segment (EuroCor) to contribute 43 per cent to the company's total revenues by 2010.
Opto has recently completed its $70 million acquisition of Criticre Systems, a US-based publicly listed company specialising in vital signs and gas monitoring instruments. The brokerage estimates the Criticare acquisition to generate incremental earnings of Rs 0.60 per share in FY2009E and Rs 1.80 per share in FY2010E.
Sharekhan expects Opto's fully diluted earnings (without Critcare) to grow at a CAGR of 35 per cent over FY2007-10E on the back of a 57 per cent CAGR in revenues. The brokerage estimates earnings of Rs 20.0 per share in FY2009E and Rs 29.9 per share in FY2010E.
Sharekhan has valued the stock using the dividend discount model and the P/E mutiple, arriving at price targets of Rs 453 and Rs 470 per share respectively. Using the average of the two, the brokerage has fixed price target at Rs 460 per share.
Opto is trading at attractive valuations of 16.9x FY2009E fully diluted earnings and 11.3x FY2010E fully diluted earnings. Sharekhan���s current estimate do not incorporate the Criticare acquisition, which could yield incremental earnings of Rs 1.8 per share in FY2010E, implying an upside of Rs 28-30 per share to the target price.
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