MIC Electronics Ltd July 05, 2010

May 2010
Investment Rationale
CMP: Rs. 39
Rising Global Footprint

Rating – BUY The company has expertise in LED display and LED lighting products with to
comprehensive and competent design & development base, which it has
52 Week High: Rs. 59.9 developed over the last two decades. This will enable the company to make
52 Week Low: Rs. 30.2 entry into USA, South America, South Africa, UAE, Australia and Asia
demanding high quality products. The company is expected to increase its
Market Statstics revenue from exports from nearly 6% at present.
NSE MIC
BSE 532850 Order Flow
Face Value (Rs) 2
Due to the economic slowdown, the LED display business had to witness a
Equity Shares (Lacs) 1013
degrowth during the recession period. With a gradual recovery taking shape in
Market Cap (Rs Lacs) 39900 the global economy, we believe that the order flow will continue to improve,
going forward. MIC recently bagged a contract from the Municipal Corporation
Average Volume of Delhi (MCD) to install 50 display screens across the high streets and key
1M 262497 locations. MIC also got order from commonwealth Games 2010 for 19 LED
3M 249121 screens expecting rental income worth Rs. 8.56 cr.
6M 372608
Marketing Tie up with IOCL
12M 448390
The company has tied up with Indian Oil Corporation Ltd. to initiate a pilot
Return Analysis
project to market its solar-based LED lanterns on a commercial scale in select
In MIC Relative to
states. Under the tie up, the company will utilize IOCL marketing strength and
(%) Electronics Nifty Nifty
resources to market its solar based LED lanterns. This will help the company to
1M 7.26 4.33 2.93 quickly reach its customers. This will also results in cost efficiencies by
reduction in distribution and operating costs.
3M -8.21 -1.01 -7.20
6M -13.38 0.69 -12.67 Favourable Industry Environment
12M 7.70 20.42 -12.72
The substantial savings in the consumption of electrical energy will be the
single most significant factor in the adoption of LED lighting solutions especially
Shareholding Pattern (Mar 10)
in the Public lighting systems, Process industries and where the lighting loads
14.42% are significant and expected to be ON round the clock. It is estimated that
globally, electricity for lighting amounts to US$ 185 bn p.a., and consumes
2300 Twh of power. This also results in polluting environment with the
39.93% generation of about 2 bn tonnes of carbon dioxide per annum. Since LEDs are
about 10 times more efficient than incandescent lights, the adoption of LEDs
will also helps in reducing such pollution. Furthermore, Governments in many
32.59% countries are formulating favourable policies for using the LEDs and giving
incentives. Owing to these initiatives, it is expected that LEDs lighting will have
rapid growth in the coming years. Energy efficiency will be a major driver for
10.62%
2.44% moving LEDs into the general (white) lighting market.
Foreign Promoter Institutional
Non prom corp Public The growth in the full-Colour market, in terms of square meters, reportedly
declined to about 15% from about 25- 30% in the preceding years. The growth
rate is expected to further come down as outdoor advertisers are slashing their
Stock Performance
budgets for digital bill boards. The real growth both in the LED display and
15000 lighting markets is starting now because of maturity achieved in technology,
90 increasing applications, pricing and acceptance.
12000
60 9000
Valuation Matrix
6000
30
3000
Year Ending 30th June FY09 FY08 FY07
0 0 Price Earning (P/E) 5.66 15.18 22.89
Jul-09 Sep-09 Dec-09 Mar-10 Jun-10
Price to Book Value ( P/BV) 1.25 4.52 0.9
T otal Volume ('000) (LHS) MIC Electronics Nifty Price/Cash EPS (P/CEPS) 5.15 14.33 4.16
EV/EBIDTA 5.48 11.52 16.51
Market Cap/Sales 1.26 2.96 2.81

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60 Financial Performance
Segm ental Revenue(Rs.Cr)

50 For the quarter ended March 2010, net revenue grew by 9.7% QoQ to
Media Infom & comm
51.93
Rs70.41cr. EBIDTA margin rose by whopping 830 bps to 35% in Q3FY10 as
40
compare to previous year at 27%. Company reported a net profit of Rs.17cr for
30 Q3FY10, a rise of 40% compare to the Q3FY09 on the back of increased
39.03
operating efficiency.
20 14.5

10 5.77 Income Statement

0
Q3 FY09 Q3 FY10 Particulars 12M 12M 3M 3M
Rs. In Cr. FY '09 FY '08 Q3FY '10 Q3FY '09
Net Revenue 295.44 360.77 70.41 64.20
50% Segm ental Margin (EBIT) Net Revenue Growth -18.1% NA 9.7% NA
Total Expenses 221.72 270.45 45.62 46.96
40% 40.5% EBITDA 73.72 90.32 24.79 17.24
38.5%
EBITDA Margins 25.0% 25.0% 35.2% 26.9%
30%
23.2% Depreciation 5.65 2.31 0.77 0.76
20%
Total operating Exp. 227.37 272.76 46.39 47.72
10.4% EBIT 68.07 88.01 24.02 16.48
10% EBIT Margins 23.0% 24.4% 34.1% 25.7%
Media Info & comm Other Income 2.20 1.82 0.04 0.02
0% Interest 6.90 2.75 3.60 2.04
Q3 FY09 Q3 FY10
EBT 63.37 87.08 20.46 14.46
EBT Margins 21.4% 24.1% 29.1% 22.5%
Income Tax provision (3.35) 15.17 3.27 1.59
PAT 65.90 70.08 17.02 12.78
PAT Margins 22.3% 19.4% 24.2% 19.9%
Shares Outstanding (Cr) 10.06 10.06 10.06 10.06
EPS (Rs) 6.55 6.96 1.69 1.27

Peer Comparison

Company Name LTP M.Cap.(cr.) P/E P/BV RONW

MIC Electronics 39.00 399 6.4 1.33 21.65
Genus Power 202.15 302 5.9 1.05 18.39
Zicom Electron. 83.1 109 6.1 0.83 19.56
APW Pres.Sys. 142 89 16.5 1.74 21.36
Centum Electron 115.4 86 94 1.97 -1.7

At the current price, despite being the big size, the company is priced
attractively compared to its peers.

Valuations
At the CMP of Rs 39, the stock is trading at a PE multiple of 6.5x FY2009
earnings. We expect that the company is well placed to benefit from its LED
expansion plans in next 2-4years, improved marketing proficiency and
improved product mix, therefore we recommend BUY on stock.

Key Risks

High receivables

Slow economic growth

High dependence on railways

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Company Report

Company Background
Established in the year 1988 and promoted by Dr MV Ramana Rao, a
technocrat, MIC Electronics is the largest player in the Indian LED market.

The company has three divisions--LED Media, LED Lighting and

Communications & Electronics. The company is engaged in the design,
development and production of True Color LED Video Display Systems,
telecom software solutions and communication equipment (ICT). Considering
the vast opportunities in the LED lighting and display business and low margins
prevailing in the ICT business, MIC has been de-focusing on the latter since
the past two years. It is the only company in India to have a “Design-to-
Manufacture” capability for the manufacture of LED Display Systems.

MIC has a strong presence in the domains of LED Video Display

(indoor/outdoor), Graphics and Text Displays, LED Lighting Solutions, Telecom
Software and Communication & Electronic Products, and is supported by its
headquarters at Hyderabad and three manufacturing locations. To meet the
demand for its products worldwide, the company has set up establishments in
Australia, Korea and the US.

Product Portfolio

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