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3 November 2009

Bartronics
Control on costs boosts margins; Buy
Net up 121%% yoy. Bartronics 1QFY10 net profit jumped 121% yoy to Rs352m due to margin expansion and mark-to-market forex gain on the FCCBs. Given its robust order book, we retain our target price of Rs225 and Buy rating. Guidance upheld. Bartronics has maintained FY10 guidance of Rs10bn in revenue and Rs1.5-1.8bn in net profit. It expects FY10 EBITDA margin to hold at around 28-31%. The company is seeing healthy traction in its domestic business (governmentrelated orders). However, both the foreign subsidiaries (USA and Singapore) will take some time before they are out of the woods. Healthy margins. The consolidated EBITDA margin was 31%, while the standalone margin came in at 36.5%. The boost in the margin came primarily from lower employee costs in the international business and SG&A expenses. Sturdy order book. The order book stands at Rs6.2bn (65% of FY10e sales), executable over the coming 14 months; this comprises Rs5.2bn for the RFID division and Rs1bn for the smart-card division. Valuation. Our target price of Rs225 implies a target PE multiple of 5.8x and 5.1x FY10e and FY11e EPS, respectively, of Rs38.7 and Rs44.

Rating: Buy Target Price: Rs225 Share Price: Rs142

Key data
52-week high/low Sensex/Nifty 3-m average volume Market cap Shares outstanding Free float Promoters Foreign Institutions Domestic Institutions Public

BAIL IN / BARI.BO Rs194 / Rs55 15896/4712 US$1.8m Rs4.2bn / US$90.3m 30.2m 72.1% 27.9% 11.5% 4.8% 55.8%

Quarterly results
Year end 31 Mar 2QFY09 2QFY10 % yoy 1HFY09 1HFY10 % yoy

Financials
Year end 31 Mar FY10e FY11e

Sales (Rsm) EBITDA (Rsm) EBITDA margin (%) Interest (Rsm) Depreciation (Rsm) Other income (Rsm) PBT (Rsm) Tax (Rsm) Tax rate (%) PAT (Rsm)
Source: Company, Anand Rathi Research

1,605 283 17.6 31 37 216 56 26.1 159

1,748 542 89 114 219 558 206 352

8.9 91.2 190.8 207.4 NA 158.7 266.2 120.7

2,800 616 22.0 61 66 3 492 97 19.7 395

3,377 1,058 31.3 176 216 220 887 296 591

20.6 71.9 936(bps) 188.1 224.9 NA 80.3 205.1 49.7

Sales (Rsm) Net profit (Rsm) EPS (Rs) Growth (%) PE (x) PBV (x) RoE (%) RoCE (%) Dividend yield (%) Net gearing (%)

9,601 1,546 38.7 648.7 3.7 0.9 39.2 22.1 1.1 116.9

12,147 1,760 44.0 13.8 3.2 0.7 31.3 19.3 1.1 145.0

31.0 1,335(bps)

36.9 1,084(bps)

33.4 1,364(bps)

Source: Company, Anand Rathi Research

Anand Rathi Financial Services, its affiliates and subsidiaries, do and seek to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Disclosures and analyst certifications are located in Appendix 1. Anand Rathi Research India Equities

Appendix 1
Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures on subject companies

Rating and Target Price History (as of 30 October 2009)

300 250 200 150 1

Bartronics
1 2 3 4 5 5

Date 5-May-08 6-Nov-08 5-Feb-09 29-Apr-09 8-Jul-09

Rating TP (Rs) Buy Buy Buy Buy Buy 348 155 90 135 225

Share Price 226 84 68 90 155

100 50 0 Jan-08 May-08 Sep-08 Mar-08

2 4 3

Nov-08

Jan-09

Jul-08

May-09

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues. Anand Rathi Ratings Definitions Analysts ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below. Ratings Guide Large Caps (>US$1bn) Mid/Small Caps (<US$1bn) Buy >20% >30% Hold 5-20% 10-30% Sell <5% <10%

Anand Rathi Research Ratings Distribution (as of 7 Oct 09) Buy Anand Rathi Research stock coverage (95) 48% % who are investment banking clients 7%

Hold 15% 0%

Sep-09

Mar-09

Jul-09

Sell 37% 0%

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