Currently trading around 47 with a market cap of around 90 crores.
It has a Debt of around 12 crores.
Premco Global having 70 crores top line is trading at almost 300 crores Market Cap which means Mcap/Sales is around 4 and Current P/E is 26+ whereas Arrow Textiles current Mcap to Sales is around 1.8 and P/E is at 16.
Premco with export dependence is valued at 26 times and Arrow is at just 16 times, Arrow should have advantage over Premco because of a bigger product portfolio and no risks of foreign currency fluctuations and eurozone crisis etc..
If we assign a p/e of 30 to Arrow Textiles the stock should be above 90-100+.
In such a scenario it becomes very difficult for Investors to play large-scale changes like GST which will impact the sector in a big way because there is not much value left for investors to get into these biggies. This is when proxy-play becomes attractive and rightly so, Our earlier proxy-play was Vidhi Dyestuffs a food colour play on Packaged Food sector when all Packaged Food companies are at premium valuations... Vidhi has done 17 to 80 in no time and now trading at almost 25-30 p/e which is pretty close to valuations of 40+ which the Packaged Food sector usually commands in the market.
I then einquired as to why the there hasn't been any aggressive growth in terms of revenues. Mr Arora was quite clear on this one and said that they don't run behind small companies and are interested to work with big brands only and at great margins rather than having too many small clients and killing the margins.
The idea is simple, The clients of Arrow like Page Industries for instance will keep growing in terms of their manufacturing activity to get to the next level of growth and with its clients manufacturing activity increasing Arrow will be a major beneficiary. Page Industries will benefit when the end consumer buys its product but Arrow benefits in the earlier cycle when Page markets its products. When you market a product you do need branding on it so that reduces any inventory risks in Arrow Textiles that the apparel and underwear sector directly will otherwise be having.
Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”
Disclosure: It is safe to assume that i might have Arrow Textiles Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.