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Sowmya Sundar

EXPOSURE can be considered in the stock of Opto Circuits at Rs 100. The stock trades at 10 times its trailing 12-month per share earnings. The acquisitions made over the past two years have expanded its product range and started contributing to the topline.

Recently, Opto Circuit's US subsidiary, Mediaid (acquired last year), received the US Food and Drug Administration (FDA) approval to market a sensor used to measure the level of oxygen saturation in the blood and to monitor the pulse rate. The annual worldwide demand for the product is put at $0.5 billion (approximately Rs 2,250 crore). The US makes up 70 per cent of this market. This has opened up a window of opportunity for Opto's medical sensor business.

Opto Circuits makes optical sensors, critical electronic equipment used in the healthcare industry and security systems. It derives close to 90 per cent of its revenues from the healthcare industry. Most of the products manufactured — customised and standard — are exported, mainly to the US. The customised products include medical sensors used in operation theatres, intensive care units, X-ray machines and CAT scan.

The company has expanded its product portfolio through a series of acquisitions over the past two years. In May 2001, it acquired Advanced Micronic Devices, which specialises in marketing critical cardiac care equipment. Soon after, it added digital thermometers to its portfolio by acquiring this business of HLL. The acquisition of the patient monitoring division of the US-based Palco Laboratories, now called Mediaid Inc, that markets medical products for diabetes, paediatric, human monitoring and clinical laboratory areas, opens further potential for growth. Mediaid is expected to generate business worth Rs 30 crore.

Opto Circuits had a tie-up with Elekon, US, to which it supplied medical and security sensors. The sensors are used to measure pulse rate and blood oxygen content. Measurement Specialities, a designer and manufacturer of sensors and sensor-based consumer products, has acquired Elekon.

The acquiring company is looking at using Opto's low-cost manufacturing base for some of its products, in addition to the existing ones.

For the year-ended March 2004, Opto recorded 54 per cent increase in revenues and 75 per cent rise in net profits. The company has maintained a dividend of 30 per cent or (Rs 3 per share) for the past three years. A healthy cash position also gives the company good scope for further investments and growth. Shareholders have recently approved a bonus in the ratio of 3:10.

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