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Thursday, October 29, 2009

Micro Technologies (India) Ltd:Future growth prospects and outlook,buy/hold/sell?

Scripscan:Micro Technologies (India) Ltd

Story:Micro Technologies (India) Ltd is a leading global developer, manufacturer andmarketer of IT based security solutions for its clients across the globe. Productlines include the much-needed security devices, life style and support systems andweb-based software. It has developed more than 200+ generic software products insecurity & life support systems. MTIL has its presence in various segments likevehicle, premises, mobile, energy & health segments etc.

Security Solution penetration expected to rise:-
􀂃 In India around 403181 property crimes accounted for the year 2007 and rate of recovery was around 35%.
􀂃 Main reason for the existence of security companies in the market is discernable increase in crime and terrorism
􀂃 There is no major player in Indian market who offers similar technology and similar products like MTIL.

Mounting its International presence through strategic alliances:-
􀂃 MTIL is already in process to enter in countries like South Africa,Australia, Japan, Saudi Arabia etc.
􀂃 MTIL has signed in for a business worth USD 5 million for its mobile controller product, Micro MCS with FN Systems, Japan.
􀂃 Expanding its business in South Africa with a deal size of USD 6 million with TWI International PTY. Ltd, South Africa.

Geographical expansion through its Retail Outlets:-
􀂃 Micro Technologies has retail outlets under the name MICRO SHOPPE, and has been taking lot of efforts for strengthening the marketing network of the company.
􀂃 The company has expanded its distributor network and plans to increase its Micro Shoppe from 100 at present to 250 in coming 1-2 years.

Scaling up its product pipeline:-
􀂃 First mover advantage in the IT based security industry.
􀂃 MTIL plans to expand the size of its market, with mitigating business risk by reducing its dependence on only a few products.
􀂃 Products in mobile segment are in the pipeline, which shall create revolution in the market.
􀂃 Entering in health and energy segment.

Conclusion:We believe, MTIL is the strongest player among Indian electronic/ software based security industry, led by its first mover advantage in security products/ solutions and absence of core competitor in the industry. At current market price of Rs. 130-, the stock is trading at a P/E of 1.3x of FY 11E earnings of Rs. 102.82. We hereby initiate coverage on MTIL Ltd. and recommend buy rating with a target price of Rs. 206/- (67% upside) in 18 months.


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