Tax on Diesel Vehicles Not that taxing; Correction a buying opportunity n Emkay

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Tax on Diesel Vehicles

Not that taxing; Correction a buying opportunity

n     Expect tax on PV and not on CVs/3 wh/tractors. Operating economics of a diesel car/UV will continue to be favorable vis a vis Mar08 despite a 5%-7% charge

n     In the past, capital cost increases (emission norms increase of Rs 20K to Rs 40K) did not impact demand. In the auto space, M&M and MSIL have maximum exposure.

n     Diesel PV accounts for 30%22% of vehicle portfolio and 35%24% of net profit of M&M/MSIL. 10% lower growth in diesel PV to impact our FY12 EPS by 7%/4% for M&M/MSIL

n     Reiterate do not expect significant demand drop due to tax on diesel vehicles. Remain buyers in stock on sharp correction in stock prices