Sensex
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Bartronics
No bar on high growth
Full benefits of its recently commissioned smart card project will add to its growth rate going forward
| Buy | Bartronics |
| BSE Code | 532694 |
| NSE Code | BARTRONICS |
| Bloomberg | BAIL@IN |
| Reuter | BARI.BO |
| 52-week High/Low | Rs 288 / Rs 92 |
| Current Price | Rs 224 (as on 16th November 2007) |
Incorporated in 1990, Bartronics started its business in the field of bar coding and smart card technology. Later it started experimenting with the new Automatic Identification & Data Capture (AIDC) solutions.
The company is involved mainly with the manufacturing sector and has implemented a number of projects across companies in their manufacturing set-ups. The projects primarily involved inventory & logistics management, time & attendance and asset tracking systems. AIDC is seen as an enhancing technology as it automates the data collection for the main systems. Currently, the company offers diverse range of AIDC technologies – barcode, biometrics, radio frequency identification (RFID), radio frequency data communications (RFDC) and electronic article surveillance (EAS).
Established player in the fast-growing business
Being one of the first organized players to provide end-to-end AIDC solutions in India with more than 1,600 clients and five international distribution centers, BIL has the advantage of being the first mover. Strong technical know-how has helped the company move up the value chain from bar code to RFID solutions and increase realization per client. The company has also diversified into the retail space considering the low penetration of organized retail.
BIL has established a brand value amongst its clients (about 1,600) over a period of 16 years. The work includes system integration for barcode solutions, which has applications in areas such as inventory management, attendance recording, dispatch management etc. The companies clientele includes Tata Steel, Tata Motors, HLL, ITC, Ashok Leyland, TVS, CMC, Ranbaxy, Compaq, VST, Whirlpool, ITW, Dr. Reddy’s to name a few. The company also provides services to the devotees of Lord Balaji (Tirupati) by managing the inflow logistics of the pilgrims. Some of its multinational clients include Compaq, Panasonic, IBM, GM, Mercedes Benz, etc. The company has also started providing RFID solutions to the same set of customers and moving up the value chain.
The AIDC industry is rapidly moving towards the use of RFID in a number of high value and high volume market segment. The RFID market is expected to grow from $1.4 billion annually to $6.1 billion in 2010. RFID and biometrics solutions are growing at an exponential rate with retail and manufacturing growth in India.
Host of foreign alliances
To take the company into a new league, BIL constantly strikes alliances with the best in the industry across the globe. To offer state-of-the-
Taping the smart card potential
The Indian smart card market is at a nascent stage with the demand coming from various sectors such as banking, retail, telecom, healthcare and government organizations which are likely to witness exponential growth over next three years with most companies looking at data security and collection.
To capture the demand for smart cards estimated at more than 150 million units per year and growing at a CAGR of 48%, BIL set up the first smart card manufacturing plant in India having a capacity of 80 million units. Initially, BIL plans to capture around 70% of the SIM card market,. A further fillip to the smart card market is expected from the proposed Multipurpose National Identity Card to be implemented by the central government. BIL is among the companies shortlisted and the pilot project in underway. The banking sector will also drive this industry with switch from the current magnetic tapecards as Visa & Master Card deadline will expire in next three years.
Good geographical spread
In order to have strong global presence the company has five international distribution centers. These centers cater to the growing AIDC demand in the countries such as Malaysia, Sri Lanka, Bangladesh and Dubai. Having strong relations with clients has also helped the company expand to newer geographies as the clients moved to the other markets and wanted BIL to provide solutions. These new geographies will help the company expand the market and gain market share.
Strong financial performance
On consolidated basis, during half year ended September 2007, Bartronics has registered revenue of Rs 93.27 crore. This is against standalone revenue of Rs 54.74 crore (up 93%). And consolidated PAT stood at Rs 17.29 crore against Rs 8.93 crore (up 63%).
Forex loss for the quarter was Rs 50 lakh against Rs 38 lakh in the sequential quarter. Currently 50% of the revenues is export. The company has a natural hedge with regards to import of chips.
The Company has established a wholly owned subsidiary based at Singapore during the period June 2007 to cater to the need of South East Asia countries and reorganised business for better focus. Hence the comparable consolidated figures for the corresponding period previous year are not available.
Full benefits of smart card plant will be reflected in future
The company started dispatches from its smart card facility. For Q2FY08, it is working at 20% capacity with dispatched 4 million cards with revenues at Rs 14.4 crore and EBITDA of 15%. The target net margin for the business is 20%. The company has plans to work at 50% capacity (total capacity 80 million) by end FY08 meaning dispatch of 40 million cards for FY08.
The company has contract for 56 million smart cards every year for next 2 years from Giesecke & Devrient, Germany. G&D supplies smart cards with SIM technology to Indian Telecom players and for South East Asian market.
Phase II wherein the company would set up the chip manufacturing facility would be commissioned in January 2008. Currently, the company has tied up with ST Microelectronics and Infineon for the chips.
Revenues to grow handsomely in coming years
For FY08, the company expects revenues of Rs 200 crore of which Rs 100 crore would be from smart card segment and Rs 100 crore from solutions segment. The net margins expected are 20%.
For FY09, the revenue target is Rs 350-400 crore with net margins of 20%.
The current year promises to be a very exciting year for the company: On one hand the traditional business of the company viz. providing solutions is showing a healthy trend while on the other hand, the company has invested significantly into a smart cards manufacturing facility. Smart cards as the emerging technology in the AIDC umbrella offers the company a great chance to break into the big league.
Valuation
In FY 2008, we expect the company to register consolidated sales and net profit of Rs 232.33 crore and Rs 41.50 crore respectively. The diluted equity of the company post conversion of FCCBs and preferential allotment would be Rs 30 crore. Thus on fully diluted basis and face value of Rs 10 per share, EPS works out to Rs 13.8. The share price trades at Rs 224. P/E works out to 16.2, which is reasonable for a fast growing company.
| | 0709 (3) | 0709 (6) | 0803 (12P) |
| Sales | 67.83 | 93.27 | 232.33 |
| OPM (%) | 23.5 | 23.8 | 23.5 |
| OP | 15.91 | 22.17 | 54.60 |
| Other inc. | 0.08 | 0.21 | 0.42 |
| PBIDT | 15.99 | 22.39 | 55.02 |
| Interest | 0.36 | 0.82 | 1.55 |
| PBDT | 15.63 | 21.57 | 53.47 |
| Dep. | 0.86 | 1.42 | 4.62 |
| PBT | 14.77 | 20.15 | 48.85 |
| Tax | 2.25 | 2.86 | 7.35 |
| PAT | 12.52 | 17.29 | 41.50 |
| EPS* (Rs) | 16.7 | 11.5 | 13.8 |
| * Annualized on fully diluted equity of Rs 30.00 crore. | |||
| Bartronics: Standalone results |
| | 0709 (3) | 0706 (3) | Var. (%) | 0609 (3) | Var. (%) | 0709 (6) | 0609 (6) | Var. (%) | 0703 (12) | 0603 (12) | Var. (%) |
| Sales | 28.84 | 25.43 | 13 | 15.79 | 83 | 54.27 | 28.05 | 93 | 63.50 | 28.97 | 119 |
| OPM (%) | 19.8 | 24.6 | | 26.8 | | 22.1 | 25.7 | | 26.6 | 25.4 | |
| OP | 5.72 | 6.26 | -9 | 4.23 | 35 | 11.98 | 7.20 | 66 | 16.86 | 7.37 | 129 |
| Other Income | 0.08 | 0.14 | -45 | 0.03 | 181 | 0.21 | 0.19 | 12 | 0.94 | 0.50 | 88 |
| PBIDT | 5.80 | 6.40 | -9 | 4.25 | 36 | 12.19 | 7.39 | 65 | 17.80 | 7.87 | 126 |
| Interest | 0.36 | 0.46 | -21 | 0.28 | 29 | 0.82 | 0.76 | 8 | 1.34 | 0.76 | 76 |
| PBDT | 5.43 | 5.94 | -9 | 3.97 | 37 | 11.37 | 6.63 | 71 | 16.46 | 7.11 | 132 |
| Depreciation | 0.86 | 0.56 | 53 | 0.33 | 160 | 1.42 | 0.65 | 118 | 1.69 | 1.00 | 69 |
| PBT | 4.57 | 5.38 | -15 | 3.64 | 26 | 9.96 | 5.98 | 66 | 14.77 | 6.11 | 142 |
| Tax | 0.41 | 0.61 | -33 | 0.38 | 8 | 1.03 | 0.52 | 99 | 1.30 | 0.77 | 69 |
| PAT | 4.16 | 4.77 | -13 | 3.26 | 28 | 8.93 | 5.47 | 63 | 13.47 | 5.34 | 152 |
| EPS* (Rs) | 5.6 | 6.4 | | 4.4 | | 6.0 | 3.6 | | 4.5 | 1.8 | |
| * Annualized on fully diluted equity of Rs 30.00 crore. | |||||||||||
From: The Sharekhan Research Team [mailto:marketwatch
Sent: 16 November 2007 15:00
To: The Sharekhan Research Team
Subject: Sharekhan Post-Market Report dated November 16, 2007
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