CRIME and TERROR have made security a prime concern for everyone.
CMP (BSE): Rs. 195.05
CMP (NSE): Rs. 194.35
Industry: IT Software Products
Micro Technologies (India) Limited. (MTIL) is an IT based company and a leading global developer, manufacturer and marketer of security devices. It caters to various clients throughout the globe. Its products includes the much-needed security devices, life style and support systems and web-based software. It is highly focused on innovation and advanced technology to accomplish its aim of providing its clients SECURITY. It is one of the most valued security solutions provider across the globe and has been accorded with many national and international awards for its growth and R&D.
The concept of complete security in vehicles, home and mobile is still making its place in the minds of people. As the economy is growing, the disposable income of people is increasing and with the concept nuclear families picking up the idea of having complete security is also sinking in the minds of the people. The oppurtunities thus presented by these factors are enormous. Currently, the penetration of security products in premises, automobiles and other asset segments is low, thus there is a huge potential demand for these security products.
The India security market is expected to increase enormously to about US$ 10-12 billion by 2016 because security is something that has been transformed from an administrative subject to a business continuity issue. According to the estimates, India's total homeland security spending in the Indian market is estimated to reach US$ 8 billion by 2016. The hotel infrastructure security is projected to total over US$ 1.2 billion and transport security is projected to reach US$ 1 billion by 2016. The banking and financial security services is estimated to over US$ 800 million. Government facilities and real estate is pegged at US$ 400 million.Healthcare sector estimated to US$ 660 million and industry sector demand over to US$ 800 million. Sensing this enormous oppurtunity from the beginning, MTIL displays high product diversity in various segments of vehicles, premises, mobile, other assets and now is even entering into the energy & health segment.
MTIL has earned a good reputation for providing leading security solution in India as well as other countries like Israel, Japan, Belgium, etc. The business potential in Israel is around US$ 10-15 million. It has even formed a JV with Bio-Guard systems, an Israel based company for expansion of micro products in the European markets such as Poland and Portugal with business potential of around US$ 5-6 million. Even in Japan, the micro products have a revenue potential of US$ 7-10 million. It has even targeted a niche market Sri Lanka by entering into a business partnership with I-Systems, a Sri Lanka based company to market it vehicle, home and mobile security products with a revenue generation of around US$ 4-5 million.
MTIL has a very small equity base of just 12.84 crores. This would be very beneficial as earnings of the company are distributed among a lower equity base and with MTIL, I expect very good earnings in the future because of the idea of security picking up in India. In addition to this, it is quoting at a PE of just 3.93 in an industry whose average PE is 22.10. The book value is Rs. 278, thus it is currently quoting at just 0.7 times its book value. Thus the stock is available at a discount. It would be a very good buy and good long term investment.
Buying at the current levels and even at further dips would be very attractive and a good long term bet.
Happy Investing.
Valuation wise this is very cheap, one will become mad to see the P/BV and PE ratio, As per Grahan rule this is absolutely buy BUT BE CAUTIOUS. Management is more interested to spread colourful stories. I am tracking this company for last 3 yrs, management never able to meet their commitments and business also quite complex to understand. Even entry barrier to these kind of business is not so tough , any big company can enter to their business if they think SECURITY related products will create boom in days to come. I am away from their stroy. Not convinced.
ReplyDeleteThanks for sharing your view. But I still kind of like the entire forward looking vision of this particular company. They are even venturing into new areas such as Health care and Energy with their security products..This company is definitely high on innovation. Yeas, the threat of other big players entering in the market is present. But they are the ones who are totally dedicated to security related products. This sector is just picking up. It is in its nascent stage and its going to grow. There is huge potential. And valuation wise I really like this stock. Its going dirt cheap.
ReplyDeleteGood luck to you. No more comments on this.... How do you value MIC electronics and Noida toll bridge??
ReplyDelete@kkd: Noida toll bridge, I find it highly overvalued. As far as MIC electronics is concerned, it seems reasonably priced, but you can still wait for a dip to buy it.
ReplyDeleteI have just gone through its financials. Hope you have gone through its annual reports. Because just the financials won't help. Hence go through MIC electronics annual report before investing. However, Noida toll bridge I find it overvalued.
@Purvi....It was a good buy then, its a compelling buy now.Market cap now is 80% of the working capital.Operating margins are the highest in any industry 40%.40 crores of Cash on balance sheet,that is 23% of its market cap.2011 results not so spectacular, however this company would do good considering the niches they have created by launching various products.Zicom doesnt even come close when it comes to profitability,product range and geo-political presence.They have diversified in Israel,Kenya,Ukraine,Poland.The security market is projected to grow around 30-50% CAGR and is suppose to reach US$16 billion by 2016.Cat risk dramitically low owing to a strong balance sheet.Cash flow positive.This company is in a great position to take advantage of the future demand.Multibagger indeed.
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