2 Growth Stocks to benefit from GST reforms

Summary

The government’s proposed GST reform, simplifying tax slabs to 5%, 18%, and 40%, could significantly impact both consumers and businesses. For companies like Maruti Suzuki, a reduction in GST on small cars could lower prices and boost sales. Similarly, JK Cement stands to benefit from a reduced GST rate on cement, potentially lowering costs and aiding growth. Both companies have solid expansion plans, but challenges like rising expenses and market volatility may temper short-term growth. The GST reform presents both opportunities and risks, and its full impact will unfold over time.

Takeaways

• 😀 The government has proposed a major GST reform, reducing the number of slabs to just three, with 5%, 18%, and a 40% rate for luxury goods.
• 😀 GST cuts on essentials and mass-market categories are expected to reduce product prices, boost affordability, and increase demand.
• 😀 Maruti Suzuki could see a 5-10% increase in sales if the GST on four-wheelers is reduced from 28% to 18%. This could reduce prices by about 8%.
• 😀 Maruti Suzuki's sales revenue primarily comes from passenger and commercial vehicles, with CNG vehicles making up about 35% of total sales.
• 😀 Maruti Suzuki's financials show strong growth, with a 72% CAGR in profits over the last 3 years, but expenses like material costs and employee expenses have put pressure on profitability.
• 😀 Exports and the SUV segment are driving growth for Maruti Suzuki, with a strong focus on EVs and a target to become India's largest BEV manufacturer by 2031.
• 😀 Maruti Suzuki's market share stands at around 40%, with other competitors like Hyundai and Tata Motors trailing behind at 13% and 12.32%, respectively.
• 😀 JK Cement stands to benefit from the GST rate reduction from 28% to 18%, which could lower cement prices by 7-8%. However, cement volumes are less elastic.
• 😀 JK Cement operates in grey cement, white cement, and paints, with grey cement contributing 81% of its revenue, followed by white cement at 19%.
• 😀 JK Cement's expansion strategy includes increasing grey cement capacity by 27% and improving cost efficiency through green power usage, alternative fuels, and raw material security.

Q & A

What is the proposed GST reform in India?

The government has proposed simplifying the GST structure by reducing multiple slabs to just two main tax brackets: 5% and 18%, along with a higher 40% slab for luxury and sin goods.

How will the GST reduction impact consumer prices?

If GST is reduced on essential and mass-market products, their prices could decrease, leading to greater affordability, which in turn can boost consumer demand.

Which company stands to benefit most from the GST reform in the auto sector?

Maruti Suzuki India is expected to benefit from the GST reform, as its vehicles currently fall under the 28% GST slab. A reduction to 18% could reduce vehicle prices, especially for small cars.

How does the GST reform impact Maruti Suzuki's market position?

Maruti Suzuki, with almost 40% market share, could see a sales boost of 5-10% if GST on small cars is reduced, further solidifying its leadership position in the Indian passenger vehicle market.

What is the current financial performance of Maruti Suzuki?

Maruti Suzuki has seen a 20% CAGR in sales over the last three years, with profits growing even faster at 72%. In Q1 of FY26, the company reported a 7.9% revenue increase, though operating profits declined due to higher expenses.

What are some of the risks facing Maruti Suzuki?

One key risk is a 4.5% drop in domestic sales in Q1 of FY26, with the mini and compact car segments facing the most significant pressure. This impacts 45.6% of Maruti’s domestic sales.

How is JK Cement impacted by the GST reform?

JK Cement stands to benefit from the GST rate reduction from 28% to 18% on cement, which could lead to a 7-8% reduction in prices, improving affordability in the market.

What are the major revenue verticals of JK Cement?

JK Cement operates in three verticals: grey cement (81% of revenue), white cement and allied products (19%), and paints (small contribution), with the company focusing on expanding in each segment.

How has JK Cement performed financially in recent quarters?

JK Cement reported a strong financial performance in Q1 FY26, with a 19.5% increase in revenue to ₹3353 crore, driven by a 14.4% increase in sales volume and a 4.2% improvement in realizations per tonne.

What is JK Cement's growth outlook for the future?

JK Cement is aggressively expanding its capacity, targeting a 27% growth in grey cement production by the end of FY26. They are also focusing on cost efficiency, with plans to save ₹40-50 per tonne in FY26 and targeting 60% green power use by the end of FY26.