EUR 120.00 For Business Accounts Only

MOSL: Morning India (26/September/19): 1. Automobiles (Tax cut: Structurally positive than temporary GST cuts); 2. The Corner Office - ICICI Prudential Life Insurance (Persistency, margins on track; return rati

MOrning India (26/September/19): 1. Automobiles (Tax cut: Structurally positive than temporary GST cuts); 2. The Corner Office - ICICI Prudential Life Insurance (Persistency, margins on track; return ratios steady)

 

Today’s top research Idea

AUTOS: Corporate tax cut structurally positive than temporary GST cuts | EIM & AL – Biggest beneficiaries

• The corporate tax cut should result in PAT upgrade of ~7% for our auto universe companies in FY20/21E (ceteris paribus). EIM, AL, ESC, HMCL, BOS, AMRJ, EXID and CEAT (11-13% PAT upgrades) will gain the most from the tax rate cut; we expect MSIL and TTMT (2-4% benefit) to benefit the least.
• OEMs might consider using the tax savings to directly/indirectly spur demand. MSIL has today announced price reduction of ~INR5,000 for select models.
• Incentives announced in the budget for localization of EV batteries (along with recent income tax benefits) bode well for 'Make in India' - for lithium batteries and other EV components.
• For FY20, we see a high probability of volume-led earnings cut to more than fully offset upgrades due to tax savings, as volume weakness has been longer and more severe than estimated.
• Our top-picks are MSIL and MSS in large-caps, while AL and ENDU are our mid-cap picks. EIM is our only Buy in 2Ws.

Piping hot news

Wooing investors, PM Modi says more reforms soon

Prime Minister Narendra Modi promised to further simplify India’s tax regime, including bringing tax on equity investments in line with global standards, making a strong pitch to global business leaders to invest in India. India will not shy away from taking the toughest decisions, Modi said at the Bloomberg Global Business Forum in New York that was attended by top executives of some of the world’s biggest companies. “We will undertake necessary modifications on a regular basis on tax-related laws and to bring tax on equity investments on a par with global tax regime," he said.