1

Stock Data

Sector Capital Goods

Face Value (Rs) Rs.2.00

52 wk. High/Low (Rs.) Rs.59.90/22.05

Volume (2 wk. Avg.) 334000

BSE Code 532850

Market Cap (Rs.mn.) 4161.88

Financials (Rs.mn.) FY09A FY10E FY11E

Net Sales 2954.40 3102.12 3474.37

EBIDTA 759.20 1006.96 1162.25

PAT 667.20 785.98 913.71

EPS (Rs) 6.55 7.79 9.05

P/E (x) 6.32 5.31 4.57

MIC ELECTRONICS LTD BUY F

I

R

S

T

C

A

L

L

R

E

S

E

A

R

C

H

SYNOPSIS

• MIC Electronics is a global leader in the design,

development & manufacturing of LED Video

Displays, high-end Electronic and

Telecommunication equipment and development

of Telecom software.

• During the quarter company bags Parramatta

League Club order to Install 120 sqm screen for 3

years.

• During the quarter introduces 3 new products for

the global markets.

• During the quarter MIC Electronics Limited

received purchase orders worth Rs. 14.15 Crores.

• MIC in joint venture with Hyperion Green Energy

India Pvt Ltd has secured the Rajahmundry

Energy saving project for municipal street

lighting.

• MIC enters MOU with Indian Oil Corporation for

marketing of solar LED lantern.

• The company is looking opportunities in other

segments like sports, billboards and information

display.

1 Year Comparative Graph

MIC ELECTRONICS BSE SENSEX

V.S.R. Sastry

Equity Research Desk

vsrsastry@firstcallindiaequity.com

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

drsastry@firstcallindia.com

C.M.P: Target Price: Rs.41.35 Rs.50.00

Share Holding Pattern

April 17, 2010

2

Peer Group Comparison

Name of the company CMP(Rs.)

Market Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/BV(x) Dividend (%)

MIC Electronics 41.35 4161.88 6.40 7.23 1.44 20

Siemens 735.75 248065.6 30.99 26.09 8.50 250

Astra Microwave 66.70 3611.4 2.69 49.04 2.92 25

Investment Highlights

• Results Update (Q2 FY10) For the quarter ended on Dec 31, 2009 the profit of the company increased 18% YoY to Rs.215.40mn from Rs.183.10mn. Revenue for the quarter stood at Rs.759.70mn, which is 7% less than that of the corresponding period of the previous year. EPS for the quarter ended on December 2009 stood at Rs.2.14 per share of Rs.2.00 each. The expenditure for the quarter stood at Rs.499.90mn. Consumption of raw material stood at Rs.305.50mn.; employee cost for the quarter stood at Rs.63.30mn and other expenses at Rs.162.40mn.

3

Type of Expenses Q2 FY10 Q2 FY09 YoY Chg.

Raw Material Expenses 305.50 401.80 -24%

Staff Cost 63.30 61.30 3%

Other Expenses 162.40 122.90 32%

Interest expenses for the quarter stood at Rs.22.80mn and depreciation at Rs.11.80mn.

• Segment Revenue

4

• Bags Parramatta League Club order MIC Electronics Ltd bagged a 3 year long contract to supply video screen with Parramatta Eels National Ruby Club through their alliance with Sequity Pty Ltd. According to the agreement between MIC & Parramatta League Club, MIC will supply a 120sqm video screen to club. They are also partnering with Parramatta via Sequity to supply the advertising screens for their future requirements.

• MIC received purchase orders worth Rs.14.15 Crores

• Order for supply, installation and commissioning of Digital Display System (DDS) for Common Wealth Games 2010 from Indian Institute of Tropical Metrology.

• Orders worth Rs.1.90 Crores for supply of Led Luminaries from Vijayawada Municipality, Paranjape Builders, Pune, Tripura Electricity board and other corporate houses.

• Orders worth Rs.6.75 Crores received from Fullerton India Consulting, Stanford hospitals, USA.

• Introduces three new products MIC electronics recently introduces three new products that would introduce soon in India. These products have been designed around semiconductor devices form Texas Instruments (TI) including OMAP, MSP 430 and 16 channel LED Driver. MIC expects these products to make difference in the lighting arena in the country as LED-based products can reduce energy consumption enhance battery life and bring down carbon footprints.

• To garner Rs 2.18 bn via warrants

MIC Electronics will raise an amount of Rs 2.19 billion by issuing warrants to various promoters, non-promoters and from international markets. The board of directors has approved to raise short/ long-term resources from domestic and international markets. The company would offer 9,375,000 warrants at Rs 44.36 a share amounting to Rs 415.8 million and would further issue 7,125,000 warrants at Rs 44.36 a piece, aggregating to Rs 316 million to various promoters and non-promoters.

• Joint Venture with Hyperion

5

MIC in joint venture with Hyperion Green Energy India Pvt Ltd has secured the Rajahmundry Energy saving project for municipal street lighting. This will be first every city in the country to adopt the latest and the most energy efficient LED street lighting in India. In this project MIC supply LED Street lights and Hyperion will execute the project

• Railway Orders The company which is executing some works for railways currently is expecting the biggest ever LED contacts shortly from Indian Railways. Indian railway is working on a project to increase the use of LED lighting systems and also set up LED display boards at stations for passenger information and other commercial purposes.

• Launching of Solar LEDs The company launches solar LEDs for rural areas which are yet to be connected to the power grids. These LEDs are cost effective and high performance oriented. These LEDs are designed as replacements to kerosene and paraffin lanterns presently in use. The company has launched solar LED lanterns of capacity 3watts, 5 watts and 10 watts. The company has committed to provide five lakh lanterns to The Energy and Resources Institute as part of its global Lighting a Billion Lives (LaBL) campaign. These products are prices at Rs.2000 to Rs.2500 each and would give 10 times more light than incandescent lights and three times more than the conventional CFLs with more than 15 years shelf life.

• Inks MOU with Indian Oil Corporation

MIC Electronics has inked MoU with IOCL for marketing of its high efficiency Solar LED Lantern through their retail outlets/Kisan Seva Kendras and Indane Distributors

Company Profile MIC Electronic Ltd. is an ISO 9001:2000 certified companies, incorporated in 1988 at Vijayawada got shifted its base to Hyderabad, Andhra Pradesh (India) in 1990. The company, which has started its operation as a manufacturer of Electronic Display Systems, is a global leader in design, development and manufacturing LED video displays, high-end electronics and telecommunication equipments now. It also develops software for telecom sector. MIC is the only Indian company that has design to manufacturing capability for LED video display. In 1994 MIC has started exporting its products and services. The company’s first export was multi-color LED Display System to Jeddah. Saudi Arabia. From 2005, MIC has started taking on-shore software development contracts.

6

In 2006 the company acquired InfoSTEP Inc., a US based Software Company. This enabled the company to have direct access to the US market. MIC Electronics have direct presence in the North American and Australian market through it’s subsidiaries in U.S.A. and Australia. Clients Major clients of the company are:

Business Areas The company’s business is divided into three parts:

7

Media The media group is primarily responsible for the development, production and sales of video displays, text, graphic animation displays and display services including lease / rental of LED video walls etc. In India, the company has a monopoly position in the design and development of true color large displays for indoor/outdoor/mobile applications, providing true color motion picture images. MIC Electronics is the only India company to have design to manufacture capability in the field of LED video display systems. The other LED products include LED lighting applications with or without solar power and LED/LCD based 3D display systems. Info tech The Info-Tech business provides telecom software solutions in areas of Telecom Network Management, Telecom Switch Access and Computer Telephony domains. More specifically in traffic control & MIS, fraud management and interactive voice response systems for fault repair, bill enquiry, payment remainder etc. which are suited for the requirements of telecom operators. The company also provides call detail records, data collection systems for different technology switches useful for inter-operator, convergent billing and fraud detection / management solutions. Communications & Electronics Services MIC provides electronic devices and instruments such as Digital Loop Carriers, Hand held computers, CDMA/GSM PCO Call Monitors, Set top boxes and fixed wireless terminals. The company also provides network and engineering services such as on site testing and commissioning, network implementation and optimization etc. targeting basic telecom service providers and OEMs.

MIC Electronics

Media LED video display LED products & services

Info Tech

(Embedded / Telecom Software) Business Intelligence Corporate Governance IT Services

Communication & Electronics

Digital Loop Carriers Hand Held Computers CDMA / GSM Products

8

Products

LED Products

Indoor Applications

• Conference Halls • Corporate Meetings • Hotel Lobbies, OOH,

Advertising Applications • Shopping Malls, Air Ports,

Railway Stations

Outdoor Applications

• Sports Stadiums & Events / Road Shows

• Electronic Billboards / Hoardings

• News Advertisements Ticker Displays

• Shopping Malls, Air Ports, Railway Stations

Mobile Applications

• Events & Road Shows • Advertisements, Shopping

Malls, Air Ports, Railways, Bus Stands

• LED Based Solar Lighting • LED Lighting for Streets &

Homes • LED Based Railway Emergency

Lamps • LED Based Coach Lighting for

Railways

Rentals

Continuous Cash flow Generation

Sales

Revenue Generation from Sales and annual

AMC contracts

9

Financial Results

12 Months Ended Profit & Loss Account (Consolidated)

Value(Rs. in million) FY08A FY09A FY10E FY11E

12m 12m 12m 12m

Description

Net Sales 3,607.70 2,954.40 3102.12 3474.37

Other Income 18.20 22.00 14.28 15.71

Total Income 3,625.90 2,976.40 3116.40 3490.08

Expenditure -2,704.50 -2,217.20 -2109.44 -2327.83

Operating Profit 921.40 759.20 1006.96 1162.25

Interest -27.50 -69.00 -82.80 -91.08

Gross Profit 893.90 690.20 924.16 1071.17

Depreciation -23.10 -56.50 -50.85 -55.94

Profit before Tax 870.80 633.70 873.31 1015.24

Tax -151.70 33.50 -87.33 -101.52

Profit after Tax 719.10 667.20 785.98 913.71

Minority Interest -18.30 -8.20 -2.40 -2.64

Net Profit 700.80 659.00 783.57 911.07

Equity Capital 201.30 201.30 201.30 201.30

Reserves 2,076.90 2,744.10 3,530.08 4,443.79

Face Value 2.00 2.00 2.00 2.00

Total No. of Shares 100.65 100.65 100.65 100.65

EPS 6.96 6.55 7.79 9.05

10

Quarterly Ended Profit & Loss Account (Consolidated)

Value(Rs. in million) 30-Jun-09 30-Sep-09 31-Dec-09 31-Mar-10E

3m 3m 3m 3m

Description

Net Sales 599.10 568.50 759.70 797.69

Other Income 0.80 2.00 3.00 3.15

Total Income 599.90 570.50 762.70 800.84

Expenditure -448.80 -408.40 -488.10 -514.51

Operating Profit 151.10 162.10 274.60 286.33

Interest -25.60 -21.10 -22.80 -23.94

Gross Profit 125.50 141.00 251.80 262.39

Depreciation -8.60 -8.50 -11.80 -12.39

Profit before Tax 116.90 132.50 240.00 250.00

Tax -1.70 -14.80 -24.40 -25.00

Profit after Tax 115.20 117.70 215.60 225.00

Minority Interest -0.60 -1.40 -0.20 -0.20

Net Profit 114.60 116.30 215.40 224.79

Equity Capital 201.30 201.30 201.30 201.30

Face Value 2.00 2.00 2.00 2.00

Total No. of Shares 100.65 100.65 100.65 100.65

EPS 1.14 1.16 2.14 2.23

11

Key Ratios Particulars FY08 FY09 FY10E FY11E

EPS (Rs.) 6.96 6.55 7.79 9.05

EBITDA Margin (%) 26% 26% 32% 33%

PAT Margin (%) 20% 23% 25% 26%

P/E Ratio (x) 5.94 6.32 5.31 4.57

ROE (%) 32% 23% 21% 20%

ROCE (%) 37% 26% 26% 25%

EV/EBITDA (x) 4.52 5.48 4.75 4.74

Debt-Equity Ratio 0.11 0.09 0.07 0.06

Book Value (Rs.) 22.63 29.26 37.07 46.15

P/BV 1.83 1.41 1.12 0.90

Charts

12

13

Outlook and Conclusion • At the current market price of the stock Rs.41.35, the stock trades at a P/E of 5.31

x and 4.57 x for FY10E and FY11E respectively.

• The EPS of the stock is expected to be at Rs.7.79 and Rs.9.05 for the earnings of FY10E and FY11E respectively.

• On the basis of EV/EBDITA, the stock trades at 4.75x and 4.74x for FY10E and

FY11E respectively. • Price to Book Value of the stock is expected to be at 1.12x for FY09E and 0.90x for

FY10E.

• MIC Electronics Ltd bagged a 3 year long contract to supply video screen with Parramatta Eels National Ruby Club through their alliance with Sequity Pty Ltd.

• MIC electronics recently introduces three new products that would introduce soon

in India. These products have been designed around semiconductor devices form Texas Instruments (TI) including OMAP, MSP 430 and 16 channel LED Driver.

• MIC in joint venture with Hyperion Green Energy India Pvt Ltd has secured the

Rajahmundry Energy saving project for municipal street lighting.

• The company is looking opportunities in other segments like sports, billboards and information display.

14

• The company which is executing some works for railways currently is expecting the biggest ever LED contacts shortly from Indian Railways.

• The company launches solar LEDs for rural areas which are yet to be connected to

the power grids. These LEDs are cost effective and high performance oriented.

• MIC received purchase orders worth Rs.14.15 Crores.

• We recommend a “BUY” on the stock with a target price of Rs.50.00 for medium to long term.

Industry Overview Engineering Sector: Market & Opportunities

India's engineering industry is highly competitive with a number of players in each segment. The engineering sector has been growing, driven by growth in end user industries and the new projects being taken up in the power, railways, infrastructure development, and private sector investments fields amongst others. The industry attracted FDI inflows of US$ 1,196.7 million from August 1991-July 2006 India's exports of engineering goods are valued at US$ 27 billion during 2006-07 which represents a 6 per cent growth over the exports for 2005-06 (US$ 20 billion). The engineering sector accounted for 14 per cent of the country's total exports. It is also noteworthy that 40 per cent of India's engineering export is from the small and medium enterprises (SME) sector. According to Engineering Exports Promotion Council (EEPC), engineering exports could touch US$ 30 billion by 2008-09. In such a

Engineering sector

Heavy Engineering Light engineering

Transport

Capital goods

Other machinery/

Equipment

Low-tech items like

castings, forgings and Fasteners

Highly sophisticated

Microprocessor-

based

Process control Equipment,

diagnostic

15

scenario, India, driven by the engineering sector, will emerge as a key global manufacturing hub. Industry demand is driven by investments in core sectors

The demand from this sector depends largely on GDP growth, which in turn is a function of expenditure in core segments like power, railways, and infrastructure development, private sector investments, and the speed at which projects are implemented. The power sector is the largest contributor to the revenues of engineering companies. Engineering majors like Bharat Heavy Electricals Limited (BHEL) and ABB Limited derive a significant chunk of their revenues (69 per cent and 60 per cent, respectively) through the supply of equipment to the power sector. Infrastructure is another key area of operation. Larsen & Toubro Limited, for example, garners around 35 per cent of its sales from infrastructure activities like engineering, design and construction of industrial projects, social and physical projects like housing, hospitals, information technology (IT) parks, expressways, bridges, ports, and water/effluent treatment projects. The industrial segment contributes to around 30 per cent of the total revenues of the engineering sector. While India’s engineering industry has capabilities in manufacturing the range of machinery required by the different user sectors, the rapid rise in demand has led to a large part of the machinery requirements being met through imports. This indicates the size of opportunity for investment in the engineering and capital goods sector in India. The engineering industry has attracted FDI inflows of US$ 1,196.73 million from August 1991-July 2006.

Indian Engineering goods are gaining acceptance in overseas markets India’s exports of engineering goods are valued at US$ 27 billion during 2006-07 which represents a 36 per cent growth over the exports for 2005-06 US$ 20 billion). The engineering sector accounted for 14 per cent of the country’s total exports. It is also noteworthy that 40 per cent of India’s engineering export is from the small and medium enterprises (SME) sector. A key driver for increased engineering exports is the trend towards shifting of global manufacturing bases to countries like India that offer lower costs and good engineering talent. This trend is expected to continue and boost exports of engineering goods from India over the next 5 years. According to Engineering Exports Promotion Council (EEPC), engineering exports could touch US$ 30 billion by 2008-09. In such a scenario, India, driven by the engineering sector, will emerge as a key global manufacturing hub. The nature of Indian engineering exports is also changing with time. India is fast moving from exporting low value goods to developing countries to more sophisticated goods targeted at developed countries. Capital goods account for 27 per cent of total engineering exports. Exports to European Union countries and North America accounted for 19 per cent and 17 per cent respectively, of total engineering exports in 2005-06. Engineering goods worth US$ 3.34 billion were exported to USA alone in April – Feb 2006-07.

16

Growing Demand Capacity creation and transformation in sectors such as infrastructure, power, mining, oil & gas, refinery, steel, automotive, consumer durables are driving growth in the engineering industry. The framework below captures some of the key factors that are contributing to domestic and international demand for engineering goods from India. Restructuring of the state electricity boards in different states, growth of private sector players and focus on capacity creation have driven growth in the power sector.

Conclusion

The Engineering sector’s future outlook is promising. Drivers like power projects, other infrastructure development activities, industrial growth and favorable policy regulations will drive growth in manufacturing. The Indian engineering industry has been witnessing significant level of capability enhancement over the years. As export markets open up, this will help India develop a strong presence in global engineering exports. Power sector contributes the largest to the engineering companies’ revenues. Major players in this sector like ABB and BHEL derive 60 per cent and 69 per cent of their revenues from supplying equipments to the power sector. Going forward, with the Government clearing the blueprint for adding 100,000 MW in the tenth (2002-07) and eleventh 2007-12) a five-year plan, the potential is high for the engineering majors. Emerging trends such as outsourcing of engineering services can provide new opportunities for quantum growth. Engineering and design services such as new product designing, product improvement, maintenance and designing manufacturing systems are increasingly getting outsourced to countries like India and China. India’s engineering sector has significant potential for future growth, in manufacturing as well as services. With development in associated sectors like automotive, one of the largest evolving markets for engineering and industrial goods, and a well developed technical human resources pool, India is poised to make significant strides in all segments of engineering.

_____________ ____ ____________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

17

Firstcall India Equity Research: Email – info@firstcallindia.com

B. Harikrishna Banking

B. Prathap IT

A. Rajesh Babu FMCG

C.V.S.L.Kameswari Pharma

U. Janaki Rao Capital Goods

E. Swethalatha Oil & Gas

D. Ashakirankumar Auto

Kavita Singh Diversified

Nimesh Gada Diversified

Priya Shetty Diversified

Tarang Pawar Diversified

Neelam Dubey Diversified

Firstcall India also provides

Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO’s, QIP’s, F.P.O’s,Takeover

Offers, Offer for Sale and Buy Back Offerings.

Corporate Finance Offerings include Foreign Currency Loan Syndications,

Placement of Equity / Debt with multilateral organizations, Short Term Funds

Management Debt & Equity, Working Capital Limits, Equity & Debt

Syndications and Structured Deals.

Corporate Advisory Offerings include Mergers & Acquisitions(domestic and

cross-border), divestitures, spin-offs, valuation of business, corporate

restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &

Execution, Project Financing, Venture capital, Private Equity and Financial

Joint Ventures

Firstcall India also provides Financial Advisory services with respect to raising

of capital through FCCBs, GDRs, ADRs and listing of the same on International

Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and

other international stock exchanges.

For Further Details Contact:

3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071

Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089

E-mail: info@firstcallindiaequity.com

www.firstcallindiaequity.com