Buy AP Paper Mills with a target of Rs 285: Aashish Tater

Buy Andhra Pradesh Paper Mills for a target of Rs 285 from next six-eight months perspective, says Aashish Tater, Head of Research, Fortunewizard.com.

Tater told CNBC-TV18, "Andhra Pradesh Paper Mills was on our recommendation list even in 2012 around the March levels when the stock used to hover around that Rs 155-160 level. We had a target of Rs 350-370. What we do is we try to project through quant models like what could be repercussions after the post open offer method that actually goes for even eventual distribution and then takes a rally which takes it to the next level."
He further added, "What happened in last one year, during September, is that it hit that top of Rs 350-370 where our quant model actually closed this particular call. Again, the stock has retraced 1-1/3rd of its open offer price of Rs 544.90 and the company has actually paid Rs 140 to the promoters firstly because of non-competence fees. That means that at Rs 180, International Paper would not want the company promoters to come into the business and they paid Rs 140 just like that. That was paid even to the small shareholders."
"Apart from that, the business value was around Rs 400. If I try to shift that quant model and ran again, we found that ‘W’ pattern would get completed somewhere around Rs 174.50 which is roughly five-seven percent. It is not an advice that you should go and buy right now but you should be ready to cash this stock somewhere between Rs 165-175 zone from short term perspective, say in six-eight months."
"Again, you will see that retracement whenever market mechanism stabilises. These will shift towards stocks and areas where there were open offers. The stock would again go and retrace to that Rs 285 odd levels. What happens is that when you are trying to invest into midcap or smallcaps, the risks are very high. That’s why the returns should actually justify those kinds of risks you are undertaking."
"What happens at Rs 165-175, the downside gets sized to Rs 150 odd levels because you will see lot of people who actually tender into the shares as well as who have booked profit around at Rs 350-370 zone, they would like to take support on this particular stock."
"The float is just 25 percent of the remaining. Still the story remains intact because International Paper has got some very aggressive plans on the company. Given all these facts, we feel that the risk reward on this kind of market, you should be parking small amount into areas where there is relatively low risk and whenever the market stabilises, this will outperform the index. Thus this is a buy from our side for a target of Rs 285 from next six-eight months perspective." Disclosure: Safe to assume stock may has been discussed with clients but no personal position.