The government on Friday provided relief to various sectors and decided to keep gems and jewellery out of the ambit of Prevention of Money Laundering Act, which stated that jewellers must verify the identity of clients via a KYC process for all transactions exceeding Rs 50,000.

Here is a list of sectors and stocks that can see immediate gains after the change in goods and services tax (GST):

Man-made yarn
GST rate on man-made yarn reduced to 12 per cent, which will lower the prices of man-made yarn by 6 per cent immediately. Higher levy will pressurise Indian producers to source yarn and fabrics at a cheaper rate from China and Indonesia.

Indian synthetic sector’s growth rate is stagnated due to factors like high price, higher cost of manufacturing on account of high input prices and competition from other countries. With cut in GST, Indian companies can in a way compete with the global peers, according to analysts. Some of the key stocks to benefit include SRF, Filatex, JBF and Century Enka.

SRF: CMP: rs 1,577; Target: Rs 1,670

With commentaries from global agrochemical players indicating revival by end of 2017, the management stated that it expects an improvement in demand in the specialty chemicals segment by the last quarter of FY18. "We expect the substantial capex made in the chemicals segment to start contributing to revenues from FY19 onwards, hence maintain a ’buy’ rating with a target price of Rs 1,670," said Mehul Thanawala, director, JM Financials.

Pumps
GST on pump parts has been cut to 18 per cent which will boost confidence of pumps manufacturers. The pump market in India is valued at about Rs 10,000 crore in FY16 and is expected to grow at 8 per cent annually.

In spite of several challenges, pump manufactures in India have continuously improved productively and quality. However, several micro and small-scale pump and spare parts manufacturers have stalled production temporarily as they were unable to meet the expenses after GST was implemented.

Some of the key beneficiaries would be Shakti Pumps, Kirloskar Brothers and KSB Pumps.

Shakti Pumps: CMP: Rs 487

The stock which is currency trading at a PE of 39 times its trailing 12-month earnings is cheapest among its peers. The management indicated that the replacement demand arising from EESL & MNRE’s drive to replace inefficient pump sets with energy-efficient pumps is expected to be significant.

Current numbers of pumps is around 30 million, of which 80 per cent is in agricultural use, of which 50-60 per cent are diesel pumps. "Shakti Pumps is going to remain a key beneficiary of the government’s continued thrust on encouraging the use of solar power pumps," said Vinod Chari, analyst, Dolat Capital.

Gems and jewellery
Deepak Jasani, head of research at HDFC Securities, said the move to keep gems and jewellery out of the ambit of the Prevention of Money Laundering Act will benefit all the jewellery companies especially those who have a regional presence or higher presence in tier-2 and tier-3 cities where buyers may be more hesitant in parting with identity proof. Some of the key beneficiaries includes Titian Company, PC Jewellers and Tribhovandas Bhimji Zaveri.

Titan Company: CMP: Rs 597; Target: Rs 739

The stock has doubled since its post demonetisation lows given strong results and delivery of FY17 guidance. "Titan’s focus and execution on the wedding segment mirrors adornment where it has established itself as the leader," said Abhishek Ranganathan of Ambit Capital while recommending buying the stock with a target price of rs 739. "With large opportunity and unique asset-light model, Titan’s punchy multiple of 43 times FY19 estimated earnings is not expensive".

 09 Oct 2017, 05:16 AM