According to Centrum Equity Research, share price of the company can touch Rs 901. Smallcap firm Arrow Greentech is buzzing on Dalal Street as the share price of the company has surged 25 per cent in the last nine trading sessions. Brokerage firm Centrum Wealth has also initiated the coverage of the stock with a ‘Buy’ rating.
The share price of the company advanced 25 per cent to Rs 687.60 on September 4 from Rs 542.20 on August 22, 2017.
Arrow Greentech is the only player in India which manufactures cast WSF (water soluble film) films, a biodegradable material that dissolves in water. Globally the market size for WSF is around $262 million and is growing at 4- 5 per cent per annum with six major players including Arrow.
Over the past five years Arrow has become globally competitive, by enhancing its manufacturing capabilities and client servicing. It recently enhanced its WSF capacity fourfold in a bid to increase its offerings to high-margin segments such as agrochemicals. The company plans to replicate the success of WSF expansion by enhancing this capacity even further in the future.
According to Centrum Equity Research, share price of the company can touch Rs 901. The target price indicates 31 per cent rise in Arrow Greentech stock.
“We believe this intellectual property rights (IPR) led company (32 patents globally), which is only manufacturer of a niche biodegradable product (namely, WSF) in India, is poised for multi-fold growth based on its patent profile, WSF expansion plans, and its new business Klenz. The company has successfully monetised three patents and its patent business is moving at a rapid clip (42 per cent CAGR over the past four years). Arrow could monetise at least two more patents, potentially worth millions, over the next two to three years,” Centrum said.
The company is also quadrupling its WSF manufacturing capacity and increasing supply to industries such as agrochemicals, embroidery and detergent Packaging. Growth will also be aided by its industrial cleaning solutions division, Klenz.
Arrow is set to take the next leap in earnings growth and deliver EBITDA and net profit CAGR of 26 per cent and 21 per cent over FY17-19E, leading to high return ratios of around 33 per cent, according to Centrum.
The company has witnessed a strong growth of 38 per cent, 95 per cent and 89 per cent in sales, EBITDA and PAT during FY13-FY17. CRISIL has re-affirmed the credit rating of Arrow with MSE1 which indicates highest financial strength and highest operating performance.