A. K. Prabhakar
GST Will Have A Positive Impact On The Auto Sector
For auto ancillary, GST has been largely neutral. For the battery segment, GST has resulted in slight increase in taxes which like Exide and Amara Raja have been passed on through price hikes. For tyre companies, the rates are largely similar to current tax slabs, while for auto component companies the statewise levy would be different, it would be largely neutral. Any adverse impact would be only on working capital, which we expect to be only for the short term.
Which auto players, in your view stand to gain/lose the most owing to GST?
We believe that four-wheelers would stand to benefit the most. We believe that the price cuts done by them will only add to our positive outlook on volume growth.
In general, what is your outlook on the auto sector? Can we expect to see earnings upgrade in auto stocks?
We have a positive outlook on the auto sector, especially on four-wheelers as we believe that the long-term structural growth remains intact. Our view is based on – 1) lower penetration of fourwheelers, 2) favourable demographics, 3) interest rates trending downwards and 4) expectation of good monsoon for 2017. As regards stock preference, within four-wheeler we like Mahindra and Mahindra and Maruti. While we are not positive on the two-wheeler segment, we prefer being stock-specific and prefer Eicher Motors and TVS Motor Company.
In general, what is your outlook on equity markets?
We are very positive on market with 12,000 as Nifty target by March 2018 and by Diwali we should be above 10,800. GST will be a major trigger which will lead to earning upgrade towards second half of this financial year.
benchmark indices scaling new highs. Even though the rally is broad-based, investors need to place their bets on sectors showing high growth.
Automobile sector is ripe for investment and the GST regime promises to place the sector at an advantage and make it one of the major beneficiaries of the new tax regime. Investors looking at buying opportunities in the auto sector need to also focus on auto ancillary space, as it seems to be one of the major beneficiaries.
The benefits of GST have been welldocumented but market participants need to be patient and wait for at least couple of quarters to fully understand the impact of GST on the earnings and sales growth in the automobiles sector in