Alok Industries has target of Rs 40-45: Tater

Alok Industries has target of Rs 40-45, says Aashish Tater, Fort Share Broking.

Tater told CNBC-TV18, "Alok Industries is one stock which has been well discounted by the market, if I go by the fundamental route. But what has interested me in this stock is that it has been range bound between Rs 22 and Rs 29 mark. This is a good trading bet whenever market bounces back." He further added, "Looking at the fundamentals of this particular stock, the company owns a subsidiary in the name of Alok Infrastructure, which was bought some years back close to Rs 800 crore marketcap, which actually resulted in lot of balance sheet problems for the company with debt getting overleveraged. The company had to come out with a right issue and the stock price tanked like anything." "Now, going forward, I think debt problem for the company would be resolved because the core business is doing well and is expected to do exceptionally well for years to come. The company is into knit, weaving along with a brand called Alok which has approximately 260 retail outlets through franchise based models and company owned showrooms which will be spread to 400 stores in the next 18 months. So, we expect a bottom-line of close to Rs 5,000 crore for this fiscal and close to Rs 5,800 crore for next fiscal." "Even going by the same margin that the company has been able to generate over the years, the company has close to Rs 200-225 crore of free cash flow for next fiscal. And that would help the company to reduce the debt burden from the balance sheet which is already been seen from their current payouts." "What is interesting is that we have been bullish on the textile story and we have a pair-trade strategy for the same. We have been asking our clients to short twice the Nifty against textile stocks because beta of the stock is close to 1.8 times and at every bounce back these are showing sharper bounces than the Nifty. So, we feel on a rangebound area, this particular stock can be traded both fundamentally as well as technically from the ranges of Rs 22-23 levels to Rs 24 to Rs 29-30 mark and small positions should be kept from a longer-term perspective with a target of close to Rs 40-45 for the next 12-18 months."