Arrow coated Products - the stock of the future

  

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World over countries are spending crores to reduce pollution and promote environment friendly products in many fields .This small company – Arrow Coated Products ( ACP) BSE CODE - 516064 -is one step ahead in this endeavor  from India .This company with self developed technology backed by strong R&D and many patented products is in a unique position in the efforts to save our earth. This knowledge based company possessing 28 patents across the globe for their various products.This  unnoticed  small company is manufacturing many products for the future and I believe Arrow Coated is a company with unlimited  potential and filled with many ingredients to become a multi bagger  if its promoters can utilise the emerging opportunities effectively.ACP operating through various strategic business unis(SBU) and subsidiaries. Its major products are Water Soluble Films(WSF),Bio Compostable Plastic,Oxy Fresh Packaging films.Mouth Melting Strips, RFID and Smart Card products..etc..

1) Bio-Degradable  Cast Water Soluble Films

This product  has unique characteristic of completely dissolving in water at room temperature if it came in touch with water beyond certain time period.. The dissolved film disappears in water like sugar and the ingredients of the film change their appearance but remain present as dissolved solids in water which can be washed or flushed out after use.It is completely bio degradable and safe for environment and with time to come the use of this film not only going to increase but also indispensable because of its bio degradability. Many countries are trying to reduce the usage of plastic and WSF is a good alternative for many uses of plastic. Packaging industry especially Agrochemicals, pesticides ..etc  offering large scope for this product in future. In this segment company supplying water soluble pouches for the Agrochemical industry at present.ACP also supplying different variants of this product for industries like Embroidery, Laundry Bags, dyes, pigments, specialty chemicals and consumer goods such as detergents and cleaning agents. Mandatory packaging of pesticides in bio-degradable pouches may even turn as a reality in future. ACP  is also  in advanced stage to develop some unique products for the pharma industry  based on WSF technology.

2) Mouth Melting Strips (MMS)

Mouth Melting Strips is another unique product  by ACP which got patent for its manufacturing technology.World over less than 5 companies are manufacturing this product. The technology invented by the company for making  Mouth Melting Strips (MMS) is an IP protected innovative technology, which involves embedding actives into or upon water soluble film in any form. Once dissolved, it will release the actives in precise quantity. These actives can be in various forms, like mouth freshening menthols, Active Pharma ingredients etc. The MMS manufacturing technology was  invented by Pfizer in 2010 and till date only less than 5 companies in the entire world  including Arrow Coated having the know how to produce this product .Even the multinational Johnson and Johnson depending Pfizer’s technology to produced Listerine Mouth Freshener Strips marketed by them .This indicating the uniqueness of efforts and success of ACP ,and because of this reason it may turn as a takeover target even by MNC players. This MMS project was actually scheduled to start in 2009 but delayed due to various reasons including complexity of product..etc.Now the company overcome the issues and decided to set up a plant with initial capacity of 2.8 Cr strips per annum .The amount raised through its recent rights issue will be partly utilized to set up this new manufacturing facility.

3) Digital Technology based Security Products.

Operations of company in this sector is through a  50:50 JV with Switzerland based Nagra ID S.A.This Joint venture company is named as NagraID Arrow Secure Cards Pvt. Ltd.Due to increasing credit cad fraud ..etc , in future more sophisticated technology based cards are expected to become popular in the coming years ,which will help the company going forward.

More details about this division is available in the website of this company  (HERE)

4)  Oxy Fresh Film
Oxy Fresh film is another innovation from ACPL .It is a post harvest packaging solution which aims to reduce  wastage in vegetables, fruits & flowers caused by deterioration. This technology not only increases the shelf life of vegetables & fruits but also helps to maintain their moisture level by naturally controlling the respiratory mechanism of vegetables & fruits.

 

 
This company was also in the field of trading of printing machinery till 2009 .Thereafter it discontinued this business and concentrating in  its core business.For the past 20 years  company spend lot of time and efforts to developed many products having  tremendous potential in future.This is just starting to commercialize many of its long waiting only now.Company following a strategy of commercializing a product only after it receives patent for its product in all major potential markets.I believe it is a wise strategy ,considering the nature of business.Now it is looking to utilize all its inventions by signing partnership/joint venture agreements with big companies especially outside India. Now it is a small company unnoticed by market players and equity research firms.But I believe the potential is beyond imagination if the promoters can replicate their success of product development in marketing side too.One thing is sure , it is not a company of ‘present ‘ but a company for future. As in the case of any industry where there is very few producers with patent protection and high entry barrier ,company reported excellent profit margins  in this year and stock currently trading at the PE around 12 which is lesser for the market leader in the niche segment. We expect arrow coated to trade at least at the PE multiple of 15. Hence, we recommend a buy call at the price of 147 for the target price of 180+.

Courtesy for some content to value-picks blog.