Moser Baer poised to gain from hardware-outsourcing wave

Mumbai:
26 September 2003

Mumbai: Moser Baer India (MBI), the leading CD-Rom and DVD manufacturer in India, is set to gain from the technology hardware-outsourcing wave. It is expected that the manufacturing outsourcing story in India will gain greater visibility in the coming years.

MBI, with a double-digit worldwide share of both CD-Rom and DVD manufacturing, remains the best play on the technology hardware-outsourcing wave, says a report by CLSA. Also the optical media will see a strong growth in the winter months and the benefits are bound to accrue to MBI as well.

The CLSA report says Moser Baer is well placed to tap into its cost advantages in CDs, where another three years of growth lie ahead, while expand share in DVDs, which are placed in the initial lucrative phase of their lifecycle. By FY04-end, 1.45 billion units of CD and 80-100 million units of DVD capacity will both imply 11-12-per cent global share for MBI.

The industry has already seen two rounds of price increases (by 6 per cent and 7 per cent, respectively), and the latest summer, traditionally lax, was unusually strong. This indicates that the supply overhang in the industry has been largely addressed. A further 5 per cent pricing upswing is now expected in November 2003, just before the strong winter season starts.

Meanwhile, the main raw material, polycarbonate (which forms 60 per cent of the raw material costs) has seen stable rates, whereas packaging materials such as HIPS have moved up about 10 per cent from the recent lows (at the most 1-per cent margin impact in the December 2003 quarter).

The latest market research data indicates that CD volume growth will continue till 2006 on the back of a rapidly increasing base of installed drives (100m units added in 2002), even as DVD demand ramps up in parallel. Long-term optical media demand continues to be robust.