M&M, Maruti Suzuki, TVS Motor Among Jefferies' Top Picks As Growth Outlook Improves Over GST Reforms

Jefferies prefers Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd., and TVS Motor Co. Ltd. as the growth outlook for automobile companies and original equipment manufacturer brightened on consumption boost. A potential GST cut can provide a major boost to the auto demand especially among two wheelers and small passenger vehicles.

Jefferies has raised the two wheeler and passenger vehicle volume estimates by 2–6%, driving 2–8% earnings-per share upgrades for TVS Motor Co., Hero MotoCorp Ltd., Maruti Suzuki India Ltd., and Hyundai India Ltd.

The brokerage is expecting that TVS Motor Co and Mahindra & Mahindra Ltd. will likely deliver the highest 27% and 19% EPS CAGR for the financial year 2025 and 2028. Jefferies' EPS estimates for these stocks are 5–10% above street estimates.

Jefferies has upgraded Hero MotoCorp to 'Hold' from Underperform while it retained Underperform on Hyundai India Ltd. and Tata Motors Ltd.

Two-wheelers and small passenger vehicles which are currently taxed at 28–31%, are likely to be the biggest beneficiaries of potential GST cuts. Large Sports Utility Vehicles are presently at 45–50% , which may come down to 40% too, Jefferies said.

Tractors may see a reduction from 12% to 5% GST. Although this could create an inverted duty structures as most metals and components are at 18%. GST on commercial vehicles could also reduce to 18% from 28% though freight demand is likely to be the bigger driver of truck purchases than lower vehicle prices, the brokerage said.

"A 7-10% GST rate cut can result in 6-8% reduction in on-road prices for most vehicles," Jefferies said.

Hybrid vehicles at present attract a similar GST rate as ICE compared to 5% for BEV, and any reduction could be particularly positive for Maruti Suzuki India Ltd, the brokerage said.

Jefferies believes that the roll out will likely be smooth as state governments have responded positively. No significant legal or parliamentary procedure requirements will be required to impede it.