Is there any chance of a turnaround at Bartronics India? I hold a few shares of the company.
In the past few months, the stock price of Bartronics India has been declining. However, the company has multiple growth options and we feel that the stock offers good prospects to long-term investors. A close look at the company's past five-year financial records shows a robust increase in sales from Rs 12.58 crore in FY04 to Rs 376.47 crore in FY09 at a compounded annual growth rate (CAGR) of 97.72 per cent. Also, its profit after tax has grown at a CAGR of 104.35 per cent from Rs 1.35 crore in FY04 to Rs 48.11 crore in FY09. This triple-digit growth was due to the low-base effect.
The company's return on capital employed (RoCE) has declined from 12.13 per cent in FY04 to 11.57 per cent in FY09. Its return on net worth (RoNW) has increased from 22.30 per cent to 26.38 per cent over the same period.
The company is the pioneer in Automatic Identification and Data Capture (AIDC) and RFID technology in India. It also manufactures smart cards. It has a wide client base comprising names such as Tata Motors, Reliance Group, Pantaloon, TISCO, LML and so on.
The company is strategically building up its presence in international markets. Its subsidiaries are already operational in Singapore and USA. In Q1FY11 the company set up a fully-owned subsidiary in UAE. The company has also changed its focus from barcode to the more advanced RFID technology, which is expected to find application in the manufacturing sector. It is handling projects from Indian Railways and is bullish about getting more government projects in both India and Singapore.
Government initiatives such as smart-card based ticketing in Indian Railways, financial inclusion schemes in the eastern states, and the Employee State Insurance Scheme have enabled the smart card segment to grow aggressively.
The demand for biometrics-based security applications is also catching on. More and more organisations are adopting them to safeguard their key assets. Hence, the company is expected to get more business centred on this technology. The company expects a significant portion of its domestic revenues from the financial inclusion initiatives of several banks and financial institutions. The banking sector is expected to switch from the current magnetic tape based cards to smart cards.
The company's PEG (price-to-earnings to growth) ratio stands at 0.2 owing to a three-year EPS CAGR of 36.72. Thus even the valuation of the stock is in the comfortable zone. Stay invested in the stock.