If GST gets through in monsoon session, these 5 stocks can work
June, 09th 2016
get through in the forthcoming monsoon session of Parliament .
And if it gets implemented, the GST has the potential of lifting India's GDP by another 2 per cent.
The government's bid previously to get the GST bill passed in Parliament was hampered by its lack of majority in the Upper House. As things stand now, the long-pending tax reforms has now more than two-thirds support needed for its passage in the Rajya Sabha .
"Around 163 MPs could support the bill, excluding 12 from AIADMK who had concerns but could reach a middle ground or would abstain, as opposed to 65 UPA MPs," said a TNN report.
The government will push for the passage of the bill in the monsoon session of Parliament, and will keep the proposed Goods & Services Tax (GST) rate as moderate as possible, Finance Minister Arun Jaitley said last week.
The S&P BSE Sensex has put up a strong show since May, largely on expectations of a normal monsoon and passage of the GST bill in the monsoon session. The index has already rallied over 1,400 points, or 5.5 per cent, since May.
If the GST bill does get through, it will be a huge sentiment booster for market and may put the benchmark indices on course to hit record highs.
"The GST is a constitutional amendment bill that requires two-third of sitting majority. The government is confident that the Congress party will be isolated," Mukul Kochhar, Investec Capital Services, said in an interview with ET Now.
"It seems the government has managed to get most of the opposition parties on board for its reform agenda. This along with a normal monsoon can generate some euphoria or positive sentiment in the market," he said.
The GST will replace various indirect taxes with one simple tax, creating a boundary-less national market that some say will lift India's GDP by as much as 2 per cent, an ET report said.
If you want to cash in on the passage of the GST bill, these five stocks look potential bets to get an immediate boost.
GATI: Buy | Target price Rs 150 ICICIDirect maintains a buy rating on GATI with a 12-month target price of Rs 150. The March quarter revenues numbers were in line with expectations but profitability came above our estimates which is a positive sign.
The Indian logistics industry is highly fragmented with 67 per cent of vehicle owners having fleets of less than five vehicles. Of the total express market is estimated at Rs 17,500 crore with an unorganised share of 50 per cent, said the report.
With a direct correlation to GDP and trade growth, an expected improvement in the same would buoy revenue growth for logistic players, said the domestic brokerage firm. Goods & Service Tax (GST) delay has sentimentally impacted the stock performance, but hope hinges on attaining the consensus.
Gati being one of the largest organised surface logistics players will benefit from these changes.
Stylam Industries: Buy | Target price Rs 355 IDBI Capital maintains a buy rating on Stylam Industries with a 12-month target price of Rs 355. This company is a manufacturer of high-pressure decorative laminates and has also expanded its capacity recently.
It has almost doubled its capacity to 12 million metres with the outlay of 60 crore. This segment has more unorganised players. Almost 65 per cent of the suppliers are unorganised while this company is the organised player in the sector and will directly benefit from implementation of GST.
Balmer Lawrie: Buy | Target price Rs 860 LKP Securities has initiated coverage on Balmer Lawrie two months back with a buy rating. The brokerage firm kept a target price of Rs 860 for a period of 15 months.
Balmer Lawrie (BL) is a mini-ratna company with a rich history spread over one and a half centuries of existence. It has a significant presence in industrial packaging, logistics, travel and vacations, greases and lubricants, leather chemicals and refinery and oilfield services.
Considering BL's century-old expertise in logistics, the potential for demand drove growth from policy initiatives and eventual passage of GST and the considerable upside in cold storage usage, we consider the expansion plans undertaken by BL to be a logical move.
"We believe that this ongoing expansion also offers a great upside as ROE would improve with its cash reserves & free cash flows sufficient for building these additional capacities," said the brokerage report.
Allcargo Logistics: Buy | Target price Rs 243 Motilal Oswal maintains a buy rating on Allcargo Logistics with a 12-month target price of Rs 243. The brokerage firm estimates Ebitda and PAT CAGR of 16 per cent and 26 per cent respectively through FY16-18E.
The return ratios are also expected to improve from 13 per cent to 15 per cent -17 per cent driven by improvement in margins and reduction in capex intensity in the business.
Strong balance sheet, increasing FCF will help Allcargo to further consolidate in global less than container load (LCL) market and help it to make value accretive acquisitions to further spur growth. "Its domestic land banks give it an opportunity to capitalise on the forthcoming rail DFC (dedicated freight corridor) and GST reforms," said the brokerage note.
Century Plyboards: Buy | Target price Rs 190 Motilal Oswal maintains a buy rating on Century Plyboards with a 12-month target price of Rs 190. India's Rs 200 billion plywood market is largely unorganized and fragmented players account for 77 per cent of the market. Century Plyboards (CPBI) and Greenply Industries (MTLM) dominate the organized market.
Implementation of GST can be a big boost to the company which can lead to a reduction in the price gap between organised and unorganised player thus aiding growth for the company, said the brokerage note.
"With brand leadership in a duopoly market coupled with minimal penetration of organized players, we believe Century Ply is well-placed to capture the strong growth potential of India's plywood and laminates market," added the brokerage note.