Bartronics India

Investments with a two-three year perspective can be considered in the shares of Bartronics India, considering the company’s strong order book position, increasing Indian footprint on the back of large government deals and prospects of winningmore orders over the next few years.

At Rs 166, the stock trades at 5-6 times its likely 2009-10 per share earnings. As Bartronics is seeing high growth in revenues and profits and, despite being in a hardware-intensive business, has consistently managed an operating profit margin of over 25 per cent and net profit margin of close to 15 per cent, there may be scope for further capital appreciation.

Between 2006-07 and 2008-09, the company has seen its revenues and operating profits grow nine-fold. It has increased its revenues from India to nearly 65 per cent in recent times from about 30 per cent a couple of years ago. This was made possible by growing presence in government deals, where heavy technology spends are happening. The company also delivers smart cards (mostly SIM cards) to telecom operators, again a high-growth area.

A few quarters ago, Bartronics secured a Rs 5,000-crore deal from the “Aapke Dwar” project of the Municipal Corporation of Delhi spread over nine years. Revenues are set to kick in from October with the launch of 300 kiosks in the first phase. The deal also confers on Bartronics the right to advertising revenues from these kiosks. With the Commonwealth Games set to begin in Delhi in 2010, the scope for substantial advertising revenues makes this deal even more lucrative. The company has tied up with banks for the Rs 750 crore capital expenditure needed for this deal. This could step up interest costs and strain margins. But with interest coverage of over six times, the burden of servicing debt may not be too heavy.

Apart from this deal, the company has an order book worth Rs 600 crore as of June 2009, to be executed over the next year. A large part of this has come from its high-margin RFID solutions business. Armed with key technical certifications, Bartronics hopes to win deals from the Delhi Metro and Indian Railways, with both entities set to increase technology spends. The company has several deal wins from State governments and Government projects in Singapore. Another target area is animal tagging, where the company has the necessary certification.

via BL