Arrow Coated Products : SIP (SEP 2014)

Added Arrow Coated Products again in to portfolio as SIP Sept. 2014 with 5K, 42 numbers at 118.9/-

The reason for selecting it given below.

   If I am not mistaken, Arrow Coated Products will be a multibagger in coming years even from these levels.

I am giving a three to four year target of Rs. 1000/- for this gem. (May reach that figure even before).

The thinking process and the reason behind the target is given below.

You might be already aware about the patent based revenue of Arrow Coated Products (if you are gone through VP blog and quarterly published results)

We can have a snapshot of the patent based revenue in past quarters since it started earning patent revenues.

Income from assigning of Patent marketing Rights

Qtr	Jun12	Sep12	Dec12	Mar13	Jun13	Sep13	Dec13	Mar14	Jun14
Rs (Lakh)	43.45	43.38	43.85	165.39	129.88	278.44	150.68	(waiting For AR 14)	239.29

Qtr to Qtr Growth in patent revenues                            : 84 %

Year to Year Growth in patent revenues                        : 135 %

 (Approx – waiting for AR to get exact figure)

From the table, its very much clear that, the income is increasing multi fold, and adding to this, there is no scalability issues to this revenue.

If we assume an annual growth rate of 80 % from patent revenues, it will be more than 50 Cr in next 3 to 4 years. If we give a nominal PE of 20 ( it will be sizable income & margin will be very high, since its based on patent revenue) the market cap will be more than 1000 Cr based on patent revenues alone, allowing to achieve our target price of Rs. 1000/-.

Additional Positives and potential triggers

1. Scalability is better for its business
2. Investor friendly management with increasing dividend payout
3. Better performance from it’s UK subsidiary. 
4. Upcoming introduction of its consumer products ( http://arrowcare.co.in )

Adding to this, (surely it’s a guess from my side) a possible tie up with some bigger players or possibility of QIP

5. As company planning to increase its authorized capital to 15Cr. It may be indicating to the possibility of the above guess. Waiting for the AGM on 29 Sep 2014.

Now the updated portfolio is

Company	No. of shares (Quantity)	Avg Buy Price	Initial Investment	CMP	Value at CMP	Gain in %
Arrow Coated Pro	299	83.06	24,834.70	118.90	35,551.10	43.15
Ashapura Min. Lt	80	61.5	4,920.00	72.80	5,820.00	18.29
Bambino Agro Ind	160	62.5	10,000.00	75.00	12,000.00	20
Camphor & Allied	20	217	4,340.00	345.10	6,902.00	59.03
EPC Industrie Ltd.	90	110	9,900.00	194.00	17,460.00	76.36
Granules India L	32	305	9,760.00	765.00	24,576.00	151.8
Jai Balaji Industrie	330	13.5	4,455.00	20.80	6,864.00	54.07
Kopran Ltd	96	52	4,992.00	59.90	5,755.20	15.29
Liberty Shoes Li	56	178	9,968.00	310.20	17,365.60	74.21
Nath Bio-Genes	123	81	9,963.00	132.55	16,303.65	63.64
Nitco Ltd.	330	15	4,950.00	20.20	6,666.00	34.67
Orchid Chem & Ph	55	54	2,970.00	73.65	4,042.50	36.11
Simran Farms Lim	215	13.8	2,967.00	21.70	4,665.50	57.25
Tata Chemicals	35	284	9,940.00	381.90	13,354.25	34.35
V2 Retail	330	15	4,950.00	21.50	7,095.00	43.33
Free Cash			0
Total			1,20,000		184,420	53.68

Welcome your positive as well as negative views about the above mentioned matters. Happy investing!