I’m sure, we all believe in the well-known India Growth Story coupled with rapid GDP growth, rising disposable income, improving standard of living, etc. But is the growth inclusive? Has it changed the lives of millions of people still living below the poverty line? Are we successful in proving jobs to thousands of literate people? The answer to that is a big NO which has given rise to increasing level of crimes. In India around 403,181 property crimes accounted for the year 2007 and rate of recovery was around 35%.

And this creates a huge market for organized players in Security space.

Looking at 3P’s of the Company “Micro Technologies”, namely Product, People and Price, the Company to looks like a screaming buy.

Product: Micro Technologies is a leading provider of IT based security solutions which cater to residential, commercial, vehicle, internet, mobile, and banking segments. The Company has been in the security services market from 20+ years and has tie-ups/delivery records with various organizations (MTNL, Railways, MIDC, BARC, L&T, ICICI, Axis Bank etc.) for providing its services. The Company has been continuously focused on geographically diversifying its offerings to South Africa, Australia, Japan, and Saudi Arabia. For retail penetration, the Company has been expanding its distributor network and plans to increase retail outlets from 100 at present to 250 in coming 1-2 years.

People: The only way for me to judge the quality of management is by understanding what industry stalwarts think. The Company has been awarded “Best under a billion’ by Forbes. Nasscom has given the ‘Innovative Products Award’ for its wi-fi system.  The vehicle security product has global approval from South African Independent Accreditation Services. Last, but not the most important point that speaks about the management’s trust in the company is a 4% increase in promoter’s’ stake from 30% to 34% in Dec 10 quarter when stock price fell from 200+ levels to sub 120.

Price: The Company has demonstrated stellar financial performance in last 4 years with revenue CARG of 42%, net income CAGR of 28%, a stable EBITDA margin of 36-38%. At CMP of INR 136.00, the Company is trading at PE of 1.7x. One of the possible reasons for such valuation could be its lower institutional holding (at sub 5% levels). The stock is also not covered by any of the institutions based brokerages. The only listed peer Indian peer Zicom trades at 7x earnings. There is every possibility for the stock to get re-rated in future and prove to be a multi bagger.

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