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Hold or Add Bartronics – HDFC Securities

August 24, 2007

HDFC Securities which advised a BUY on Bartronics India Ltd [BIL] at Rs 98 is asking its investors to HOLD the stock at Rs 175 levels or BUY additional quantity in the price range of Rs 121 to Rs 143.

Bartronics reported sales of Rs. 25.43 cr in Q1FY08 vs. Rs. 12.27 cr in the corresponding quarter last year. This jump of 107% can be attributed to the doubling of sales in the AIDC segment. AIDC sales mainly comprise of Barcoding and the RFID (Radio Frequency Identification) business. This quarter, RFID sales contributed about 35% topline and the remaining 65% of revenue was from the traditional barcoding business.

EBITDA margins have remained in the same range y-o-y, where as sequentially they have dropped by 720 basis points. This is because in Q4FY07, RFID contributed 52% to net sales vis-a-vis 35% in this quarter. Thus, a fluctuation of margins may be observed quarter on quarter, but the margins on a whole year basis could remain steady in the 25% – 28% range. About 40% of BIL’s revenue this quarter was through exports. The strengthening of the Indian Rupee vis-a-vis the dollar does not impact BIL’s performance significantly because BIL has a natural hedge as it currently imports the chips and hardware.

As of June 2007, BIL is an almost debt free company except for a term loan of Rs. 5 cr and working capital loans of about Rs. 11 cr from the Bank of Baroda.

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