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A GST rate cut would be positive for two wheelers and boost their earnings per share, global brokerage CLSA said on Friday.
Indian Finance Minister Nirmala Sitharaman had recently said suggestions of reducing GST on two wheelers from 28% to 18% had merit. Two-wheelers currently attract the highest GST rate of 28%, which is normally applied to luxury or “sin” goods.
CLSA said a reduction to the 18% GST slab could result in a price reduction of 8-9% assuming that it is fully passed on. Two-wheeler prices have increased 16-30% in the past two years due to regulatory changes in insurance, safety (brakes) and emissions (BS6 norms), the brokerage said.
"A lower GST could result in industry volume Cagr (FY20-23) improving from 3.6% to 6%. We estimate that FY22/23 EPS for TVS Motor could increase 17-18% while for Hero Motocorp and Eicher Motors the increase would be 7-12%," it added.
"The increase in Bajaj Auto’s EPS would be relatively lower, around 5%," said CLSA.
The brokerage continues to prefer two-wheeler companies over passenger vehicles, with Hero MotoCorp and Bajaj Auto being its top picks.
Indian Finance Minister Nirmala Sitharaman had recently said suggestions of reducing GST on two wheelers from 28% to 18% had merit. Two-wheelers currently attract the highest GST rate of 28%, which is normally applied to luxury or “sin” goods.
CLSA said a reduction to the 18% GST slab could result in a price reduction of 8-9% assuming that it is fully passed on. Two-wheeler prices have increased 16-30% in the past two years due to regulatory changes in insurance, safety (brakes) and emissions (BS6 norms), the brokerage said.
"A lower GST could result in industry volume Cagr (FY20-23) improving from 3.6% to 6%. We estimate that FY22/23 EPS for TVS Motor could increase 17-18% while for Hero Motocorp and Eicher Motors the increase would be 7-12%," it added.
"The increase in Bajaj Auto’s EPS would be relatively lower, around 5%," said CLSA.
The brokerage continues to prefer two-wheeler companies over passenger vehicles, with Hero MotoCorp and Bajaj Auto being its top picks.