Goods and Services Tax (GST) was one of the India’s most bold reforms. We have seen little hiccups in the execution, but it has come a long way.The Goods and Services Tax (GST) has completed one year on July 1.
GST was one of the biggest steps in the direction of formalisation of the Indian economy. As we all know, India had an economy which was considered as a black economy but because of GST and demonetisation, it has reduced at quite a high rate.
Can we call GST a runaway success? Experts say it is too early to call it one right now. Over the course of time, many companies, especially in the organised market, are likely to gain the most.
Which Sectors Are Likely To Benefit The Most Going Forward?
The benefits of GST will only be realised over a period of time if petroleum products are brought under the GST ambit. Under the current GST structure, experts see consumer firms benefiting the most.
The major beneficiary of this trend would be: On the product side: jewellery, plywood, apparels, dairy, luggage, air coolers and confectionary manufacturers. On the services side: hospitals, diagnostics, contract staffing, retails, hotels, SME credit and logistics companies.”
“Consumer firms will benefit the most as they pass on benefits of GST to consumers. Volumes will also increase. From our coverage V-Mart Retail, Britannia Industries and Bata India are beneficiaries of GST rollout. Apar Industries is a beneficiary on account of the tax rate.”
Here is a list of top 10 stocks that are likely to benefit the most from Execution of GST:
Exide Industries:
The Company has the advantage of having strong brand value, large network, widely spread product range, strong partners, and collaborators relationship. It is fully prepared to meet the challenge of competition, leveraging its competitive strengths of network quality, technology, product range and brand value.
As the company is one of the largest leaders in the battery space, it is likely to get the benefit, if the demand scenario improves. Moreover, it is also expected that cost reduction initiative and focuses on profitable segment would drive the margins going forward.
Jyothy Laboratories:
Jyothy Laboratories Limited is a multi-brand, multi-product company focused on fast-moving consumer goods industry. Gradual pickup in consumer demand, government initiatives and focus on rural would further aid in improving the performance of the company.
According to the management, the industry should grow by 10-12 percent and it should be doing slightly better than the industry. The company would be looking at least 25 percent market share in the next 5-6 years in the segment.
Havells India Limited:
Havells India Limited is one of India’s largest & fastest growing electrical and power distribution equipment manufacturers with products ranging from industrial & domestic usage.
The company has Consistent growth in each business parameter and it would be directly benefitted by the Government initiatives such as “Housing and power for all”. It is best placed to attain scale across businesses with its new SBU (Strategic Business Unit) structure and focused product-wise branding strategy.
NRB Bearing:
NRB Bearings is an anti-friction bearing solution provider, offering end-to-end bearing solutions to its customers across the globe. The company has regularly invested in modern manufacturing technology and has taken a number of initiatives to strengthen its competitive advantage.
The bearing sector is in a sweet spot on the back of secular growth in the automobile sector, uptick in the industrial segment, and improvement in technology, which would lead of increase in content per vehicle.
Trent:
Organized retail industry in India constitutes over 10 percent of the total retail sector whereas the same is 20 percent in China and above 80 percent in the US. DeMon and GST along with changing lifestyle has triggered large value migration from unorganized retail to organized retail.
Retail sector is poised to grow with 20 percent CAGR over the next 5 years. Trent’s strong balance sheet, strong business positioning and store expansion plan make it an attractive bet for the long-term investment. Investors can buy the stock now for a target of Rs 355 which implies 4x EV/Sales on FY20.
Century Ply:
Medium Density Fibre Board or (MDF) businesses of organized players are replacing the lowest end plywood business of unorganized players.
Though in the recent quarter’s competition have intensified among organized players in MDF but the huge potential of the shift from the unorganized segment (constitutes more than 2/3rd of the market) particularly post strict implementation of E-way bill gives confidence that management would deliver on its promise of 25 percent revenue growth in FY19.
TCI Express Ltd:
GST & e-way bill would result in a shift of market share in favor of organized players in logistics.
Express delivery is premium and a significant segment of the Logistics Industry.
The segment is expected to grow by over 17 percent on a YoY in the next 3 years. TCI Express is focused primarily on the most profitable segment of B2B space. It has ROCE of 40 percent.
Titan Company Ltd:
High-value diamond jewelry sales proportion is likely to increase from 30 percent of diamond jewelry sales in FY18 to 50% in FY23. The contribution of Exchange sales segment is set to reach 50 percent by FY23.
A higher proportion of exchange sales reduces the vulnerability to import curbs on gold. Investors can buy now for a target of Rs 1,050 which implies 10x P/B on FY20.
NCC:
NCC has consistently focused on execution which is backed by strong order backlog which makes it one of the best stocks in infrastructure basket.
If you look at the Q4FY18 numbers, it has delivered a robust performance with its revenue and EBITDA growing by 12 percent YoY and 75 percent YoY respectively, which led to EBITDA margin expansion to 12.7 percent during the quarter.
NCC has 4x of order book compared to FY18 topline. Looking at the massive pile-up of domestic orders, NCC is looking to shut down its international operations over the next 6-12 months.
Radico Khaitan:
Radico Khaitan is one of the largest players in the Indian liquor industry. It became the first company to conceptualise the innovative idea of offering scotch blended whiskey and the first company to position 8-PM as India’s premium whiskey.
With improving demand scenario for liquor and execution on track it has witnessed a rise in volume growth, margin expansion, and free cash flow generation.
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