Recommend a buy on Orient Paper: Pankaj Pandey, ICICI Direct

Pankaj Pandey, Head of Research, ICICI Direct, in a chat with ET Now talks about Orient Paper.

You have recommended a buy call on Orient Paper with a target price of Rs 64. You have also mentioned that the cement accounts for 60% of its revenues. Now seeing the downtrend in the cement space, would you possibly take back that buy call in which, what would you recommend now going forward?

In terms of cement space, we are positive on select pockets, especially the players which are really not pan-India players. The reason we are positive on some of the players is that we feel that there is a good amount of volume growth, which again would negate the kind of realisation from what we are expecting going forward. So in that sense, this particular company stands out.

We are expecting this company to deliver about 18-20% kind of a volume growth going forward, which again would sort of negate the kind of realisation crop, which we are expecting. Though in terms of turnover wise cement contributes about 60% odd but in terms of EBIT wise, the contribution of cement is far higher at 85%. So primarily this is a cement company and with the kind of valuations if you look at, most of your large caps or good players are trading upwards of $100EV per tonnebasis and this company is available at about $40EV per tonne.

So with the kind of volume growth and with the kind of multiples it is commanding, we feel that there is obviously a room for some amount of catch up. So I still hold on to my call of buy on this particular stock.