Steady loan book makes Federal Bank top midcap pick: Siddharth Sedani, Anand Rathi

In an interview with ETNow, Siddharth Sedani, Vice President - Equity Advisory, Anand Rathi, shares his outlook on UPL and the overall banking sector. Edited excerpts:

ET Now: Why do you like UPL?

Siddharth Sedani: The stock is a major player in the agri inputs space as in this segment 80% is export and 20% domestic. The company has gained lot of market share on back of diversified product offerings and a new launch. We expect sales CAGR growth of 15 per cent for next two years. Even the operating profit margins are likely to remain around 22-23% for next two years. The stock is trading around 17 times FY18 and 13 times FY19, we believe that UPL is a good story to participate in the rural theme.

ET Now: Let us talk about the banking space and what the appeals are within this sector.

Siddharth Sedani: Among midcaps we like Federal Bank. As we know that the loan book has been steady in nature on the back of strong corporate lending. Even the loan book has grown 32% on a year-on-year bass, even the lower funding cost and high yielding corporate loan book NIMs seems to be steady at around 3.3%. So we believe management has indicated that asset quality concerns are more or less behind so overall perspective we believe they are shifting their books towards retail where again the NIMs will be quite good. So Federal Bank with a medium term perspective looks very interesting with a target of 109.