Orient Paper & Industries Ltd - Demerger to trigger value unlocking process :Emkay

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Orient Paper & Industries Ltd

Demerger to trigger value unlocking process

BUY

CMP: Rs62                                        Target Price: Rs82

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n     Q1 APAT at Rs584mn (+70% yoy) above est (Rs457mn) led Revenues at Rs5.33bn (+21%), Cement (+11.4%), Electricals (+22.3%) & Paper (+137%)

n     Cement revenues +11.4% yoy to Rs3.34 bn as realizations improved 29% yoy and 5.6% qoq –driven by elevated levels of FY11 exit cement prices resulting in higher quarter averages

n     Board approves de-merger of cement business into a new wholly owned sub- Orient Cement Ltd (OCL) - triggers the much awaited value unlocking process

n     Stock trades at undemanding valuation of 6.6x FY12 PER & EV/EBIDTA of 4X. We maintain our BUY rating on the stock with revised target price of Rs82