BARTRONICS INDIA LTD (17Th JULY08)
CMP:142/- Target:306/-
Bartronics India (BIL), one of the first Automatic Identification and Data Capture (AIDC) solutions company, is leveraging its existing client base and expertise to move up the value chain and emerge as the largest end-to-end AIDC solutions provider in the country.
Company Background
Bartronics was incorporated in 1990 and started its business in the field of bar coding and smart card technology. It later 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). The company has recently set up an 80 million smart card facility in Hyderabad to cater to the growing demand from the telecom sector and plans to enter the retail market soon.
AIDC segment – First mover advantage
BIL is 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. 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, a sector that is clocking at 30% CAGR growth.
Changing gears with smartcards
Smart cards are expected to take the company into fifth gear with the South Asia’s largest manufacturing facility. Having an order book for more than 100 million smart cards over next two years is expected to generate 3.5x FY07 revenues from this segment alone.
Strong growth in RFID Solutions, US acquisition power Top-line:
Bartronics India (BIL) reported an outstanding 495% yoy growth in its 4QFY2008 Top-line. This was a result of impressive growth in its Automatic Identification and Data Capture (AIDC) Solutions business, specifically in the RFID Solutions business, as also contribution from the Smart Cards segment. Apart from this, as may be recalled, BIL had acquired a US company towards early 2008, which contributed Rs33cr to Topline. Strong growth in sectors like Retail has led to robust growth in the company’s RFID Solutions business. BIL provides end-to-end solutions in this space, including pilot testing and software integration. A positive feature in recent times has been the fact that RFID revenues, as a percentage of total AIDC revenues, have been on the rise. RFID Solutions generally enjoy better Margins than traditional AIDC Solutions like Bar Coding. BIL’s total outstanding order book position at the end of FY2008 stood at a significant Rs345cr and constituted 128% of total FY2008 Revenues. Of the total order book, a majority is in the Smart Cards business (Rs200cr), which is a substantial 215% of FY2008 Smart Card Revenues (Rs93cr). The visibility in Smart Cards is quite strong, with assured off-take from BIL’s manufacturing facility till FY2009 from the Telecom Sector. Post-FY2009, a number of government projects in the Railways and the Public Distribution Scheme (PDS) are likely to result in fresh demand for smart cards. Thus, visibility is strong and this business is likely to grow at a strong pace going ahead.
Risks
Competition from players such as CMC in the RFID space is a risk. Direct entry by the company’s overseas principals (from which Bartronics sources some products), into the Indian market, is also a risk if there is an absence of non-compete agreements.
Valuations
Investors with a one-two year perspective can buy the shares of Bartronics, considering its strong business prospects and reasonable valuations. At the current share price of Rs 142, the stock trades at about 8.7 times its trailing earnings and 5.2 times its likely earnings for FY 2009 and 4.6 times for FY2010. So considering the sector assuming 10 times to it FY09E earnings one can have a target price of 306/-.
With thanks
K a l y a n
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