3 midcaps best placed to gain from RBI rate cuts
Benefits of lower interest rate havn't yet had an impact on the ground with base rates yet to come down. At the same time, mere lower rates will not be sufficient to catalyse growth.
Focus needs to be on companies that have moderate leverage and can use rate cuts to increase growth in their business.
Below are the three key names that can leverage on 50bps YTD rate cut to grow their portfolio.
LIC Housing Finance : LICHFL' core mortgage business should see growth as mortgage rate cuts will likely add to demand especially in the middle income housing segment. Further the company has levers to grow its net interest margins over the next two years on the back of build up of high-yield portfolio. Valuations for the company are reasonable at 2.2x F17 P/B.
Sobha Developers : The company's foray into the middle-income housing segment is going to be a potential game changer. Based on channel checks, the company has registered strong demand in its maiden mid-income launch in Bangalore. Rate cuts will not only help grow affordable housing portfolio but also reduce interest outgo on its portfolio. Leverage on the company is reasonable at Net D/E at 0.7x.
Sintex : It has had strong revenue growth driven by improvement in custom moulding and prefab business. The company is levered to any uptick around marque government schemes such as Clean India/ housing for all etc. Capex in the business, however, continues to be high but revenue growth interest cover has now become reasonable with EBITDA/ net interest at 3.2x for 9MF15.
Happy Investing
Source:Moneycontrol.com
Benefits of lower interest rate havn't yet had an impact on the ground with base rates yet to come down. At the same time, mere lower rates will not be sufficient to catalyse growth.
Focus needs to be on companies that have moderate leverage and can use rate cuts to increase growth in their business.
Below are the three key names that can leverage on 50bps YTD rate cut to grow their portfolio.
LIC Housing Finance : LICHFL' core mortgage business should see growth as mortgage rate cuts will likely add to demand especially in the middle income housing segment. Further the company has levers to grow its net interest margins over the next two years on the back of build up of high-yield portfolio. Valuations for the company are reasonable at 2.2x F17 P/B.
Sobha Developers : The company's foray into the middle-income housing segment is going to be a potential game changer. Based on channel checks, the company has registered strong demand in its maiden mid-income launch in Bangalore. Rate cuts will not only help grow affordable housing portfolio but also reduce interest outgo on its portfolio. Leverage on the company is reasonable at Net D/E at 0.7x.
Sintex : It has had strong revenue growth driven by improvement in custom moulding and prefab business. The company is levered to any uptick around marque government schemes such as Clean India/ housing for all etc. Capex in the business, however, continues to be high but revenue growth interest cover has now become reasonable with EBITDA/ net interest at 3.2x for 9MF15.
Happy Investing
Source:Moneycontrol.com
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