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Autos (Sonal Gupta)
Budget 2011 impact: Minor tweaks in duties
As we had expected, excise duty (CENVAT) was maintained at 10% level. We
don’t see a significant impact on auto demand as well as co. profitability for our
coverage cos. The reduction in surcharge on income tax from 7.5% to 5% is a
minor positive for auto cos.
Excise duty maintained at current levels, CKD definition changed
The govt. has however changed the definition of completely knocked down
(CKD) kits to exclude units containing pre-assembled engine or gearbox or
transmission mechanism or a chassis where any of such parts or sub-assemblies
is installed. We believe this could negatively impact several global OEMs who
are importing such components as they may now be subject to higher customs
duty from the current 10%.
Customs & Excise duty reduced for some hybrid vehicle components
Concessional rate of 5% excise duty for hybrid vehicle has been extended to incl.
battery pack, battery charger, AC/DC electric motors and motor controllers. The
same components can also now be imported at 5%CVD and exempt from basic
customs duty and SAD. Excise duty for hybrid conversion kits has been reduced
from 10% to 5%. However, Micro hybrids (with Start - Stop technology) have
been excluded from definition of Hybrid motor vehicles.
Bigger Taxis to also get 20% excise duty refund
Taxis for transport of up to 13 people (incl. driver) are now eligible for 20%
refund of excise duty. Earlier this was allowed only for Taxis for transport of up
to 7 people (incl. driver). Factory built ambulances will now attract 10% excise
duty similar to those vehicles which are subsequently converted to ambulances
(and therefore can claim refund for the excess excise duty above 10%).
Sector view
We expect volume growth for the sector to moderate in FY12 given rising
interest rate and inflation. We remain positive on rural demand outlook due to
strong rural income growth and govt. stimulus. We remain positive on the stocks
as we believe valuations are already factoring in significant negatives.
Top picks
Our top picks in the sector are Hero Honda, Maruti and M&M. We remain
positive on Hero Honda and M&M as beneficiaries of strong rural demand in
FY12. We remain positive on Maruti due to attractive valuations.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Autos (Sonal Gupta)
Budget 2011 impact: Minor tweaks in duties
As we had expected, excise duty (CENVAT) was maintained at 10% level. We
don’t see a significant impact on auto demand as well as co. profitability for our
coverage cos. The reduction in surcharge on income tax from 7.5% to 5% is a
minor positive for auto cos.
Excise duty maintained at current levels, CKD definition changed
The govt. has however changed the definition of completely knocked down
(CKD) kits to exclude units containing pre-assembled engine or gearbox or
transmission mechanism or a chassis where any of such parts or sub-assemblies
is installed. We believe this could negatively impact several global OEMs who
are importing such components as they may now be subject to higher customs
duty from the current 10%.
Customs & Excise duty reduced for some hybrid vehicle components
Concessional rate of 5% excise duty for hybrid vehicle has been extended to incl.
battery pack, battery charger, AC/DC electric motors and motor controllers. The
same components can also now be imported at 5%CVD and exempt from basic
customs duty and SAD. Excise duty for hybrid conversion kits has been reduced
from 10% to 5%. However, Micro hybrids (with Start - Stop technology) have
been excluded from definition of Hybrid motor vehicles.
Bigger Taxis to also get 20% excise duty refund
Taxis for transport of up to 13 people (incl. driver) are now eligible for 20%
refund of excise duty. Earlier this was allowed only for Taxis for transport of up
to 7 people (incl. driver). Factory built ambulances will now attract 10% excise
duty similar to those vehicles which are subsequently converted to ambulances
(and therefore can claim refund for the excess excise duty above 10%).
Sector view
We expect volume growth for the sector to moderate in FY12 given rising
interest rate and inflation. We remain positive on rural demand outlook due to
strong rural income growth and govt. stimulus. We remain positive on the stocks
as we believe valuations are already factoring in significant negatives.
Top picks
Our top picks in the sector are Hero Honda, Maruti and M&M. We remain
positive on Hero Honda and M&M as beneficiaries of strong rural demand in
FY12. We remain positive on Maruti due to attractive valuations.
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