Thriving On Insecurity - Micro Technologies

Micro Technologies (MT) business thrives on the fear and insecurity of others and has all the ingredients which help a company perform consistently over the years. MT is a leading developer, manufacturer and marketer of IT-based security systems. It has both soft as well as hard qualities which makes the company a value pick at a price of Rs 119. MT’s product line includes much needed security devices, life support systems and web-based software. Company’s topline has been growing at compounded annual growth rate of 86 per cent and bottomline at 96 per cent between FY05 to FY08. Moreover, company’s return on equity has been increasing and is currently at 25.86 per cent, going up from 11.81 per cent in FY05.

With the increase in the perceived risk of crime and terrorism, at both individual and corporate level, companies like MT have immense potential to grow. MT provides cutting edge security technology and offers products which cater to various segments like vehicle, premises and mobile. MT is adopting very cohesive strategy to tap nascent market of IT-based security systems. To diversify and increase the market for its products, the company is entering into new segments such as energy and health. To increase its client base, the company is entering into new geographies such as Kenya. The Kenyan market provided huge potential for company’s product because of high crime rate in Kenya. In order to increase the sales and commit resources to its main product, the company is forming subsidiaries for its product line. Its two subsidiaries - Micro Secure Solutions (MSSL), is engaged in providing premises security products to commercial and residential premises, while Micro Retail (MRL) provides services to vehicle, premises and other assets. To keep itself abreast in the ever-changing world of technology, the company comes out with new products and enhancement of old products at regular intervals. Recently (in October), it launched Micro SAMS (Student Attendance Management System). Prior to this, it has launched Micro MCS (Mobile Control System) in September. It has also lined up new products to be launched like Micro PMTS (Pet Movement Tracking System), Micro E-Health, etc. All these strategies bear the results in company’s financial performance.

Performance and Valuations
For the fiscal year 2008, the company reported sales of Rs 172.4 crore against sales of Rs 106.9 crore in year FY07, giving a growth of 61 per cent. Net profit stood at Rs 52.5 crore in FY08 versus Rs 30.8 crore in FY07, growing by 65 per cent. The company posted good financial results for Q1FY09. Topline has gone up by 67 per cent to Rs 57.76 crore from Rs 34.51 crore in Q1FY08. During the same period, its bottomline increased by 65 per cent and it recorded profit of Rs 17.44 crore as against Rs 10.54 crore. The EPS for the company stood at Rs 54.96 during the trailing twelve months, discounting the current share price by 2.16 times. We expect the company to post healthy EPS for FY09 and recommend our readers to invest in the counter with a price target of Rs 160 in the next one year.