Buy Orient Paper - A C Choksi

3 mtpa cement capacity expansion plan in Karnataka, shifting to value added product in the paper business

Orient Paper is planning to set up a 3 million tonne cement plant in Karnataka, which should be operational by FY15. Land acquisition for the greenfield in Gulbarga district of Karnataka has reached an advanced stage.

Value unlocking through De-merger of cement business.

Orient Paper has received the High Court's approval for de-merger of the cement business of OPIL into Orient Cement Ltd (OCL). The de-merger would be value accretive for the company. OPIL expects to complete the demerger process over the next quarter and will list Orient cement separately.

Commission and stabilization of its power plant to rationalize the costs.

Its new 50 MW power plant stabilized and enabled OPIL to meet most of its power requirement for the Devapur cement plant. The company is in the advanced stages of commissioning 55MW power plant. The commissioning of power plant is expected to bring in cost savings for the company and will also contribute towards stabilizing its operations.

Attractive valuations

We believe at CMP of 74, Orient Papers is trading at an attractive valuation, considering value unlocking through de-merger in on cards. We initiate coverage with a BUY Rating on Orient Papers with a target price of 83, valuing it using EV/EBITDA Method.

Source : Equity Bulls

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