Stock To Buy Post RBI Policy: This Stock Will Benefit Post RBI Move

The Reserve Bank of India decided to maintain an accommodative stance, even while keeping the policy rates on hold. Here is one stock that will benefit from the RBI's decision to hold interest rates steady.

Buy the stock of NCC post RBI policy

NCC Ltd, also known as Nagarjuna Constructions has been a top player in the construction space. It has significant presence in housing and construction, roads, railways, water and environment, irrigation, railways power etc. The accommodative stance by the RBI would benefit the company as interest rates are going to stay lower for longer. Therefore, the company would benefit on account of its debt, which most companies in the construction space have on account of massive working capital requirements.

NCC: Steps to being down gross debt

The company has managed to report lower gross debt on a quarter on quarter basis, according to a report by Anand Rathi.

Quarter-on-quarter higher mobilisation advances of Rs 2 billion (net of bills settled) and Rs 0.5 billion lower trade receivables more than sufficed for Rs 1.3bn q/q higher exposure to the related parties as well as growth needs. Consequently, gross debt was Rs 0.7 billion lower q/q to Rs 20.4 billion. On healthy recoveries, management targets year-end gross debt of Rs18 billion, broking firm Anand Rathi has said in a report.

NCC valuations appealing; retaining Buy on the stock

Brokerage firm, Anand Rathi feels that the valuations are appealing and have maintained a buy on the stock.

"NCC's Q3 11-quarter high revenue from operations evidences the subsided Covid impact and a gradual ramp in its pace of execution. This, the recent healthy orders added, and the consequent augmented order backlog, thus, renders NCC well placed for better times ahead. Its balance sheet is in shape, but could have been better save for the deal to monetise the Vizag land, now kept in abeyance. Nevertheless, efforts are underway and any success would be a good augury. On the anticipated bright prospects and comforting valuation, we retain our Buy rating with an unchanged target price of Rs. 105," the brokerage has said.

Healthy additions, sturdy assurance.

With Q3 orders of Rs 40.3 billion added, 9 million additions have been a strong Rs 96.4 billion, comfortably ahead of execution. "Consequently, revenue assurance is sturdy. The end-Q3 Rs402bn gross OB is estimated to comprise Rs 395 billion of the standalone-operations-attributed OB.

This would imply revenue assurance of 4.2x. FY22 order additions are targeted at Rs 140 billion, implying Rs 44 billion more in Q4," the brokerage has said.

The stock of NCC was last trading at Rs 71.40 on the NSE.

Disclaimer

The above stock of taken from the brokerage report of Anand Rathi. Investing in stocks is risky and investors must consider the risk. The author, Greynium Information Technologies Pvt Ltd and the brokerage firm Anand Rathi should not be held responsible for any losses based on the above article. Markets are increasingly volatile and hence further caution is advised.