Orient Paper & Industries: PAT is expected to grow at 91% during FY19; Buy

SKP Research | Oct. 4, 2018, 12:33 p.m.

Valuation

Orient Paper has moved up the value chain into tissue paper, which has higher growth potential and better realizations, leading to a self-sustained model (increasing profitability) backed by favourable demand-supply equilibrium and muted domestic wood prices.

We have valued the stock on SOTP basis valuing Orient’s core paper business at 7x EV/EBITDA of FY20E and investments (except Brajrajnagar land) at Rs 8/-share. We recommend a BUY on the stock with a target price of Rs 57/- in 15 months, although the long term story looks even better. Any monetization of Brajrajnagar land will trigger an upside potential of Orient Paper profitability and stock price.



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