Tuesday, September 25, 2007

Buy MIC Electronics, target Rs 525: Pioneer

MIC Electronics Ltd. ( MIC) is a Hyderabad, Andhra Pradesh based manufacturer of LED displays, electronic & telecom (ICT) equipment and also offers software services for the telecom segment.
 
The ICT segment accounted for approx 67% of its FY07 revenues. However, MIC aims to leverage its expertise in design, development and manufacturing of LED display systems and boost its share in revenues in the coming years.
 
To capitalise on the changing demand dynamics of the Media industry , MIC is scaling its display LED display module manufacturing capacity from 6,000 p.a. to 15,000 p.a. by end - CY08.
 
In Oct'06, it acquired an InfoSTEP Inc., a US based software services outfit catering to the ICT sector. This gives it access to the lucrative North American market. �� MIC raised Rs 765 million via its IPO in Apr'07. The proceeds are proposed to be utilised for manufacturing capacity enhancement and beefing up its R&D and marketing initiatives .
 
It's order book in the media segment is approx Rs 1.5 billion executable over 12 to 18 months. In telecom segment, the same is approx Rs 650 million to be executed by H1FY08. Backed by strong growth in both its business segments, MIC reported a 130% increase in net sales to Rs 2.4 billion for FY07, with a 108% growth in net profits to Rs 322 million.
 
At the CMP of Rs 436, the stock trades at a P/E and EV/EBIDTA of 13.1x and 10.1x FY09E earnings. Considering its product range, technical competence and operational scale up, we initiate coverage with a 'BUY' recommendation, with a price target of Rs 525, on an investment perspective of 12-months.

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