EUR 120.00 For Business Accounts Only

MOSL: Morning India (24/September/19): 1. Consumer (Corporate tax cut – structural benefits for some industry players); 2. Petronet LNG; 3. Hexaware Tech; 4. Utilities; 5. Expert Speak (Consumer)

MOrning India (24/September/19): 1. Consumer (Corporate tax cut – structural benefits for some industry players); 2. Petronet LNG; 3. Hexaware Tech; 4. Utilities; 5. Expert Speak (Consumer)

 

Today’s top research idea

Consumer: Corporate tax cut - structural benefits for some industry players

Post the Indian government's announcement of a reduction in the corporate tax rate, we present our views on the likely earnings impact on consumer sector, the key monitorables and the changes in our stock views.

• In our view, GSKCH, UBBL, BRIT, APNT, ITC, PGHH, JUBI, PAG, UNSP, NEST and CLGT (all coming under 33-35% tax bracket on earlier forecasts for FY20-21) will be the biggest beneficiaries of the lower corporate tax rates effective from FY20. All these companies are expected to see an EPS increase in the range of 12%-13% for FY20 and FY21 (keeping other assumptions unchanged).
• Other names likely to benefit are HUVR/PIDI/TTAN (between 29% and 32% tax rates) with EPS upgrade in the range of 6-10%.
• MNCs are the biggest gainers, in our view. This means that companies like Dabur and GCPL (which do not see material gains from the corporate tax cuts) are likely to be less attractive on a relative basis, particularly if HUVR and CLGT step up promotional efforts in categories like oral care and soaps.
• We believe it is important to look at absolute tax savings rather than percentage tax savings because PBT margins for larger companies in paints, jewelry, QSR, biscuits, etc., are significantly higher.
• HUVR and TTAN remain our top picks. However, as a result of the corporate tax cuts, BRIT and CLGT move above MRCO and UNSP in the pecking order, as the event was neutral for MRCO and gains on UNSP could be tempered a bit if states increase excise duties significantly.

 Piping hot news

Scrappage policy to propose hike in re-registration fees of old vehicles

Towards phasing out of older, polluting vehicles, the Road Transport and Highways Ministry has proposed manifold increase in the renewal of registration fees of vehicles older than 15 years of age. The proposed hike will be implemented from July 2020, a senior government official said told Mint.