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Tuesday, September 15, 2009

MIC Electronics Ltd:Future growth outlook and prospects

Scripscan: MIC Electronics Ltd

Story:Established in 1986, MIC Electronics - MICE is a pioneer in design, manufacture and supply of Light EmittingDiodes - LED display and lighting solutions. MICE disappointed investors who had high expectations on its business opportunities primarily because large orders envisaged from Latin America and from the US billboardgiant - Lamar Advertising did not materialize due to the global credit crunch. Additionally execution delays and inability to hedge its US exposure by procuring orders from other geographies and FII unwinding saw the MICE stock reach an all time low of Rs15.But things have changed for good and the the counter has staged a smart recovery. We met up with the management of MICE to understand the strategies to leverage the business opportunity in the changed scenario.MICE (signifying Media, Infotech and Communication) has de-focused from the ICT business and is now afocused LED player given the exciting addressable opportunity in this space (despite being a low-entry barrier business) as growing applications of lighting in indoor like MICE - (Meetings, Incentives, Conventions & Conferences, Exhibitions), hotels, shopping malls, airports and railways and outdoor applications like billboards,sports, tickers including renting for outdoor events like Elections, Marriages and Concerts, increasing OOH advertising spends and availability of true colour LED displays are the key growth drivers for this business.We believe that Indian Railways can emerge as a sizeable business opportunity for MICE given the fact thatthe Railway opportunity can encompass close to 1,20,000 coaches and 13,000 platforms. With the Railways modernizing over 100 stations with display systems and given the fact that MICE is RDSO approved and has proven its capabilities at stations like Madurai & Patna, MICE in our opinion is well placed in this segment with its product offerings like True Color multi lingual display screens, coach lighting products (including pathway, berth indication, emergency lighting and reservation chart lighting among others all adding up to a potential$1bn coach lighting opportunity for MICE).Opportunities for LED display in Highways and Street Lighting with Municipal Corporations is lucrative and MICEhas come up with new product offerings like Variable Message Sign - VMS for highways, stock exchanges andairports.MICE went public in April 2007 when they offered equity shares of Rs10 each at Rs150 to fund their acquisition and expansion plan and the company is known in India for its perimeter screens and replay screens seen in sports events like the IPL , Soccer and Race Clubs. MICE competes internationally with large LED players like Daktronics, Barco, Yesco, Lighthouse and Mitsubishi among others.With a clear vision to emerge among the top five global players in true colour LED display business over a five year period we believe MICE which now has more than 75% revenues coming from the Media segment has been able to withstand a turbulent 2008 and we expect the company to bounce back from FY'09-10 onwards and return to the growth phase.A good buy at sub 35-38 levels.

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