AP Paper Mills has target of Rs 350-370: Aashish Tater

Andhra Pradesh Paper Mills has target of Rs 350-370, says Aashish Tater, Head of Research, Fort Share Broking.

Tater told CNBC-TV18, "AP Paper is a very interesting story. Last time, we suggested that our experience on the quant model suggests that stock should test Rs 140-150 mark, where we expect a bottom to be made and then the story would begin from two years perspective. Exactly the same happened; the stock found support around that Rs 145 odd mark on intraday basis and then started coming up."
He further added, "The company was acquired by International Papers and it paid Rs 544.9 per share of which Rs 140 was non-compete fees, which get paid even to small investors. That means its parent company International Paper was happy to pay Rs 140, so that no body else enters into the business from promoters side. So, take the call at Rs 180. This company has got tremendous potential in terms of land bank capacity. From next two years perspective it should at least double from current levels. So, this is a stock where you can find that the downside is limited to Rs 20-25 odd mark and a potential upside of almost 100%."
"There could be another development because International Paper might go for delisting of this stock because it does not make much sense for International Paper to have 25% float remaining with the public. So, they might again come up with an open offer. We feel if the open offer again comes, they would be happy to pay that Rs 544.9 that they paid to the existing holders last time or slightly more. It has got better management, its balance sheet is cleaned up and all the expected losses have been already priced in, so the worst seems to be over."
"We expect that there will be a positive turnaround from next quarter. So, from fundamental angle, delisting angle and from the perspective that the foreign parent would definitely give a premium to the stock, we feel this stock should be taken from two to two and a half years perspective where we have a target of at least Rs 545. But, we would take a conservative call because we believe that as an Indian investor you should take a call like an Indian investor. We would first have a target of close to that Rs 350-370 odd mark. If there is a delisting move, we will talk about Rs 545 in days to come."