What we can learn from Opto Circuits?
The investors of Opto Circuits are FRENZY!
The stock crashed from Rs. 180.00 to Rs. 50.00. We receive emails on Futurecaps view about the company.
About Company: Opto Circuits (India) 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 150 countries. The company specialises in vital signs monitoring, emergency cardiac care, vascular treatments and sensing technologies.
Futurecaps on the Stock
First of all, we did not recommended it, because it was Over-Priced at the time! But in the positive way.. In 2010 it was a very good company, very good growth records, good technology, great recognitions including Forbes Magazine.
You can see here the analyst who recommended it is facing questions:
He is a very good analyst, I would say the investor is Amateur, He approached Stock Market in a wrong way!
See how people react with prices:
Best Way to Approach Stock Market
Gone are the times where Business Owners have sleepless nights, today they have Hedging!
Gone are the times where Investors have bad surprises, today they have Diversifications!
Gone are the days where Investors blame the bear market, they are Opportunities!
From the day 1 of Futurecaps, we have been iterating the following
- Place only 25% of your savings in stock market
- Place at least 10 companies in the stock market investments
- Take an investment period of 10-20 years
- Stocks do not have fixed price, only situational price
- Bear market are the time where you get prices at the lowest
We should always ready to bear the Opposite Side of Investing >> When Stock Price reaches 0.
So how to apply these knowledge:
If you would have used 10 companies in your portfolio, then need not worry about Opto Circuits. After all, worrying at this level is of no use as the price fall almost 70% from 52 week high.
The good thing is that you are Cool with your Portfolio if you have 10 stocks in it:
- As you will have 1 or 2 troubled companies during market good times
- During market times you have all companies troubled, but it investing time as a whole
Based on our evaluations on the company, it is a Bargain Buy now, honestly 🙂
|History of Consistently Increasing Sales, Earnings & Cash Flow|
|Durable Competitive Advantage||Company is a solid player in the technology enabled medical equipment market.|
|Future Growth Drivers||We expect the medical equipment business to progress in future too.|
|Conservative Debt (long term debt < 3 Net Profit)||Current Liabilities around 500 crores & Contingent Liabilities around 700 crores. Both are less than 3 times of Net Profit (500 crores)|
|Return on Equity must be Above Average||ROE is 37% (which is exceptionally good)|
|Low CAPEX required to maintain current operations||Working Capital problem exists as per study.|
|Management is holding / buying the stock||Management wanted to buy the stock, instead they will prefer to use the money in paying of debts by US subsidiaries.|
|Price is Under Valued (< intrinsic value)||Very True, Intrinsic Value falls around Rs. 550 based on current EPS & Growth. Plus the PE is just 2, with price quoting below book value.|
|Stock Price is consolidating||Not consolidating, more chance to go down.|
Following are the problems faced by company:
- Working Capital Issue
- Cash Flow is Negative
- Credit Rating in Trouble
- Debt due to Foreign Subsidiaries
The company is taking solution measures like:
- Appointing new CFO Krishna Sudheendra who was CFO in Bangalore International Airport.
- Appointing Usha Ramnani (w/o CEO) as Managing Director of US Subsidiary Opto Cardiac.
- Allocating money through new debt instruments
These measures should ease the problems giving a long term view.
Based on the current evaluations, discarding the current problems, we believe it is having Multibagger properties. If the company resolves current problems, then in 5-10 year it could reach Rs. 500 through profits & growth. In this view it provides a 10x MULTIBAGGER opportunity.
Recommended prices of investing are around 50.
Next installment around 30.
Warning: Be cautious with news & alerts on company. Do not invest more than 5% of your portfolio. Minimize risks using Guard Bands!