Opto Circuits - March 2013 Results Preview - Motilal Oswal

- We expect Opto Circuits (OPTC) to post 4.4% YoY decline in 4QFY13E revenue to INR6.33b, led by 15.5% YoY decline in invasive business and 1.5% decline in non-invasive space. We estimate a sequentially tepid quarter, given the absence of clarity over future growth outlook.

- EBITDA would decline 6.3% YoY to INR1.37b and EBITDA margin would contract by 40bp, mainly due to higher employee expenses.

- We expect OPTC to report PAT of INR749m, compared to INR2.1b in 4QFY13. This decline would be mainly on account of (1) higher depreciation and interest costs, (2) higher tax outgo, compared to a tax credit reported last year and (3) lower other income (forex gain in 4QFY12; amount not disclosed).

We remain cautious on OPTC given the (1) uncertainty over the business environment, which led to withdrawal of top line growth guidance, (2) increased working capital stress, which will take some time to normalize and (3) low return ratios impacted by restrained asset turnover. The stock trades at 2.9x FY14E and 2.4x FY15E EPS. Maintain Neutral.

Source : Equity Bulls

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