I am glad that you raised this. Please find below the balance sheet and the P&L account of Micro Technologies. All the figures in this are in Crores Rs.
As per my understanding the balance sheet looks very strong. They have an equity base of Rs 10.97 crore which is 1.097 cr shares. Now the best part is Rs 192 cr as Reserves & Surplus amount. This shows the strength in the balance sheet. Further, they have total debt amount Rs 70 cr (Unsecured and Secured). In the previous year this was 9.37 cr and is increased to Rs 70 cr. With in this debt amount also the unsecured portion has a bigger contribution, in fact only unsecured has increased. This is not a good decision. But will not affect it adversely. The debt:equity ration is still in favour of the company. The D:E will be 70:203 which will be 0.34. The company is very conservative in using the funds. I like it very much.
Instead of looking standalone Debtors number I would prefer to look at Net current assets and current liabilities number and compare. The Net Current Assets of Rs 188.63 cr while the Current Liabilities are of Rs 15.69 cr. This gives us a difference of Rs 172.94 Cr. If it's divided in 1.097 cr shares then each share has Rs 157.64 cash available. This is extremely positive (I am using an adjective 'extreamly' because it's to be used to describe a very positive aspect of the balance sheet). This gives me the margin of safety and my investment gets protected in case the company gets into difficult time. This what is taught in the value investing principle. Remember if the company is growing and sales is increasing rapidly then there is a possible of debtors number increasing accordingly.
P&L Account. Last year the profitability (PAT*100/Revenue) was at 28.88% and this year it has increased to 30.54%. It means the company does not have any pressure on the bottom line. It's not because the company is innovative and is operating in the niche areas. The other income component is almost negligible which means that entire profit is from operations.
In last 5 years, which is a good indicator to suggest that it's not an overnight success, its revenue and profits did not dip a single time. They have shown healthy growth. The company has been paying consistent dividends at the rate of 20% during last 3 years and 10% during first two years.
One can cook up the numbers in a year or two but you would agree that this can't be done consistently for 5 years to deliver more than average results.
Please find a link to get recent Director's report of the company: http://www.cmlinks.com/lkp/profiles/LKPDirectorreport.asp?code=17761
I did not find anything significantly negative about this report. In fact, I liked the Threats part in the SWOT analysis and also performance overview section where they have listed various partnerships and associations established during the year.
Reserves & Surplus192.1133.7102.950.4241.19
Total Shareholders Funds203.1144.311358.6146.64
Less: Accum. Depreciation22.214.171.1244.413.35
Capital Work in Progress19.8516.915.5212.562.8
Cash and Bank Balance11.123.921.131.550.01
Loans and Advances28.189.415.675.022.98
Net Current Assets118.681.6960.7720.7112.27
Miscellaneous Expenses not w/o00000.2
Power & Fuel Cost0.260.290.140.040.01
Other Manufacturing Expenses86.7358.6433.9916.1215.26
Selling and Administration Expenses7.923.41.811.170.38
Less: Preoperative Expenditure Capitalised00000
Profit before Interest, Depreciation & Tax75.0241.6221.749.14.86
Interest & Financial Charges1.620.740.510.380.32
Profit before Depreciation & Tax73.440.8821.238.724.54
Profit Before Tax59.433.3618.817.663.66
Profit After Tax52.5330.8417.636.923.51
Adjustment below Net Profit00000.6
P & L Balance brought forward56.3330.8816.9410.957.44
P & L Bal. carried down103.356.3330.8816.9410.95
Corporate Dividend Tax0.380.290.280.110.06
Equity Dividend (%)2020201010
Earning Per Share (Rs.)47.5429.0417.28.326.33
Trust this clarifies.
Niteen S Dharmawat
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
On Tue, Sep 23, 2008 at 10:15 PM, Venkateswaran wrote:
Dear Mr Niteen,
I have also been following Micro tech for some time now and more after you earlier mail on this.
When I got the Annual report for this year, I was very excited to read and understand how the management looks at these uncertain scenarios. But when I read through the Annual Report of the company, honestly I was not impressed with the way it has been presented. Very poor language and the AR looked more like a college student write-up, with unnecessary adjectives and unwanted words.
Second thing I noticed is the high level of debtors. For sales of 190 crores, more than 70 odd crores remains as outstanding.
What is your opinion on the quality of management and debtors turnover ratio?
with kind regards
On Tue, Sep 9, 2008 at 6:37 PM, Niteen S Dharmawat
You would recall that Micro Tech was reco at 220 level in Oct 07 and it reached 375+ afterwards and corrected to 200 levels sometime in Feb/March08 to provide another
excellent opportunity to enter in the stock. The stock has again retraced to 300 levels in April'08 and appreciated by almost 50% within no time.
The stock is now again trading near 220 levels. It's offering another excellent opportunity to enter into the stock at this levels.
Just to further update you on the stock from the last communication, the company has given excellent results during last quarter and year. In June Qtr the revenue of the company has increased by 67.37% to Rs 57 cr and PAT increased by 65.46% to reach Rs 17.44 cr. The profitability (PAT/Revenue) is excellent at 30.59%. YoY (March'08) the revenue increased by 60.79 % to reach Rs 171.02 Cr and profit by 64.66% to reach Rs 52.84 Cr (again profitability is healthy at 30.89%).
The company is operating in niche area and has been able to successfully create a strong positioning and a reliable brand name in the market. It has launched another product yesterday, please read details by using the link below
Micro Tech launches micro mobile controller system:
Please do not commit 100% of the investible funds but stagger your investments with 15-20% at different intervals.
Niteen S Dharmawat
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks.
Sincere efforts have been made to present the right investment
perspective. The information contained herein is based on analysis and
up on sources that we consider reliable. I, however, do not vouch for
the accuracy or the completeness thereof. This material is for
personal information and I am not responsible for any loss incurred
based upon it & take no responsibility whatsoever for any financial
profits or loss which may arise from the recommendations above.
On 10/7/07, Niteen S Dharmawat
> Micro Technologies looks good to me and can be accumulated from a long
> term perspective. The company is currently quoting at Rs 220 levels
> and will be a good buy on every dip.
> Please read the comments below and the attached file and share your opinion.
> Reasons for investment:
> - Excellent profitability
> - Good, experienced management
> -Good track record - No dip in revenue or profits during last five years
> - Very strong balance sheet. 10.52 Cr share capital and reserve of 133.74 cr.
> - Negligible debt (just 9 cr on Total Shareholders Funds i.e. Share
> Capital & Reserves of Rs 144 cr)
> - Dividend paying company
> - Good book value Rs 137
> - Decent PE just close to 7 (singe digit) and double digit growth
> - Bennet and Coleman acquired 2,50,000 equity shares of Rs 10/- each
> at a price of Rs 250.40 per share on preferential allotment basis.
> - Allotted 900000 warrants with option for conversion into 9,00,000
> equity shares of Rs 10/- each a price of Rs 250.40 per share to
> promoter group.
> - Goldman Sachs has acquired 2,59,047 shares in last couple of months.
> Please find the detail report attached with this mail. I have not made
> my comments on all the points since most of them are self explanatory.
> Niteen S Dharmawat
> Mobile: 9850571857
> IMPORTANT DISCLAIMER: Investment in equity shares has its own risks.
> Sincere efforts have been made to present the right investment
> perspective. The information contained herein is based on analysis and
> up on sources that we consider reliable. I, however, do not vouch for
> the accuracy or the completeness thereof. This material is for
> personal information and I am not responsible for any loss incurred
> based upon it & take no responsibility whatsoever for any financial
> profits or loss which may arise from the recommendations above.