Impact of duty change on motors sector

Has anyone done an analysis on the impact on taxes on the motors sector? According to my untrained eye ASHO is probably the least effected (everything they sell is diesel), that's probably why it went up yesterday but then it was overpriced even before it went up. Autodrome is a cosmetic company though it's listed under motors, so i am gonna ignore that

AMW is probably the worst effected (Maruti) but they were delisted long ago. UML will probably get hit too, they sell a lot of Peradua and lancers. What about COLO and DIMO? I think DIMO should be reasonably ok because mercs have 1800 CC (or bigger engines) and they are hopeless at selling Tata cars (buses and trucks are diesel)

Now where is that monster when you need him :-)

tubal wrote:Has anyone done an analysis on the impact on taxes on the motors sector? According to my untrained eye ASHO is probably the least effected (everything they sell is diesel), that's probably why it went up yesterday but then it was overpriced even before it went up. Autodrome is a cosmetic company though it's listed under motors, so i am gonna ignore that

AMW is probably the worst effected (Maruti) but they were delisted long ago. UML will probably get hit too, they sell a lot of Peradua and lancers. What about COLO and DIMO? I think DIMO should be reasonably ok because mercs have 1800 CC (or bigger engines) and they are hopeless at selling Tata cars (buses and trucks are diesel)

Now where is that monster when you need him :-)

I was thinking of doing an analysis on DIMO as I find it the best in the sector. It just that I did not find the time for it yet. Though this negative news hit the share , I am not sure the impact is as great as it appears.

First of all considerign its financials

*3Q EPs 167
* March quarter EPS would not be affected due to the tax issue
* Even if they report an EPS of around 50 for March, annual would be around Rs 220



Also note the ROE has improved from 5.25% to 40.71% from 2009 December to 2010 December period.

Dimo group has diversified its business segments into the areas of Power Engineering, Building Technologies, Power
Systems, Agricultural Machinery, Lighting Systems and Water Management Solutions and BIO Med devices. So its revenie is not only dependent of vehicles. Though it core business is vehicle sales which represent prestigious name as Benz, TATA, Chrysler it also markets other brands as Bosh, Komatsu, Siemens, Michelin, Osram, and Mahindra & Mahindra.


It has a wide range of vehicle from DIMO batta to High end MERCs. Also TATA carries passenger vehicle and most probably will introdude the cheap Nano at some point.

Assuming this tax rates hit 30% of vehicle sales/revenue I think this is atleast an Rs 40-50 EPS per quarter company in the medium term. So this is still undervalued even at that rate.


Given a modest PE of 10 this share is to me worth RS 2000-2200 when considering the crap that goes up to unbelievable amounts.

Agreed tubal. This is not the good news for motor sector. Since March quarter is not effected due to duty change we may expect a short term gain in this sector. Still I believe DIMO is good for medium term investment.

Coming back to ASHO. It's currently overpriced. Public holding is less than 3% (If we exclude perpetual capital). So, it can be easily manipulated. I disposed my ASHO shares Rs3700/- level. You may be thinking I must be worrying when I look at the current share price. No, I was able to gain a decent profit in 2 months. Mr. Saliya Perera must be worrying if he is alive today.

Monster wrote:Agreed tubal. This is not the good news for motor sector. Since March quarter is not effected due to duty change we may expect a short term gain in this sector. Still I believe DIMO is good for medium term investment.

Coming back to ASHO. It's currently overpriced. Public holding is less than 3% (If we exclude perpetual capital). So, it can be easily manipulated. I disposed my ASHO shares Rs3700/- level. You may be thinking I must be worrying when I look at the current share price. No, I was able to gain a decent profit in 2 months. Mr. Saliya Perera must be worrying if he is alive today.

Glad to hear that you got out of ASHO at 3700 and you are not losing sleep over the current prices of it. ASHO was overpriced at 3700 I don't quite understand what people who are buying at 6700 hope to achieve. They will definitely end up being bag holders. Same goes for people who rushed to buy UML at 169

tubal wrote:

Monster wrote:Agreed tubal. This is not the good news for motor sector. Since March quarter is not effected due to duty change we may expect a short term gain in this sector. Still I believe DIMO is good for medium term investment.

Coming back to ASHO. It's currently overpriced. Public holding is less than 3% (If we exclude perpetual capital). So, it can be easily manipulated. I disposed my ASHO shares Rs3700/- level. You may be thinking I must be worrying when I look at the current share price. No, I was able to gain a decent profit in 2 months. Mr. Saliya Perera must be worrying if he is alive today.

Glad to hear that you got out of ASHO at 3700 and you are not losing sleep over the current prices of it. ASHO was overpriced at 3700 I don't quite understand what people who are buying at 6700 hope to achieve. They will definitely end up being bag holders. Same goes for people who rushed to buy UML at 169

But who knows.. they can even announce a right issue of abt 1: 10 @ may be 100/- in the guise of something and this share will hit roof tops then )

Sri Lanka is setting bad example to investors community (esp Foriegn) by add hoc changes in their policies, this times it is vehicle import tax.

I think it is better if Gov can clearly state this level of tax is applied to this time period there after it will increased or decreased like wise. So there is transparency and it is easy for people also.

at the moment there are hundreds of cars on shipment, they are charged higher taxes when they reach to Sri Lanka..

And change in tax will affect vehicle importing companies differently..

smallville wrote:

tubal wrote:

Monster wrote:Agreed tubal. This is not the good news for motor sector. Since March quarter is not effected due to duty change we may expect a short term gain in this sector. Still I believe DIMO is good for medium term investment.

Coming back to ASHO. It's currently overpriced. Public holding is less than 3% (If we exclude perpetual capital). So, it can be easily manipulated. I disposed my ASHO shares Rs3700/- level. You may be thinking I must be worrying when I look at the current share price. No, I was able to gain a decent profit in 2 months. Mr. Saliya Perera must be worrying if he is alive today.

Glad to hear that you got out of ASHO at 3700 and you are not losing sleep over the current prices of it. ASHO was overpriced at 3700 I don't quite understand what people who are buying at 6700 hope to achieve. They will definitely end up being bag holders. Same goes for people who rushed to buy UML at 169

But who knows.. they can even announce a right issue of abt 1: 10 @ may be 100/- in the guise of something and this share will hit roof tops then )

CSE is driven by speculations and rumors.

http://www.ft.lk/2011/04/28/motor-stocks-rebound-with-speculative-investors-in-driving-seat/
Lanka Ashok’s rise was linked to rumours that a share split was in the offing. All motor stocks are highly illiquid hence fetch a premium.

wiki wrote:Sri Lanka is setting bad example to investors community (esp Foriegn) by add hoc changes in their policies, this times it is vehicle import tax.

I think it is better if Gov can clearly state this level of tax is applied to this time period there after it will increased or decreased like wise. So there is transparency and it is easy for people also.

at the moment there are hundreds of cars on shipment, they are charged higher taxes when they reach to Sri Lanka..

And change in tax will affect vehicle importing companies differently..

Agreed Wiki. Policy makers act according t o their whims.Transperancy is an issue. Some motor companies can even raise the price for current stocks bougth at lower prices. Actually this maybe ( not syaing it willbut it can) beneficial to them in th short term too.

Motor stocks rebound with speculative investors in driving seat

Perhaps reflecting the Monday’s fall as a knee jerk reaction after the reduction in import duties, motor stocks bounced back with 15.6% sectoral gain erasing losses incurred early in the week.

The sector’s price index is at a new high of 37,950 points, whilst the total return index was at 46,063 points both well above the level prior to the Government’s u-turn. Last week the closing levels of the two indices were 33,165 and 40,255 respectively. On Monday after the Government raised import duties by a low of 9% and a high 27% the sector index fell by 4%.

Part of the sharp rise in sector index was owing to Lanka Ashok zooming to a new record of Rs. 6,500.

It eventually settled down at Rs. 6,401.90, up by 40% or Rs. 1,822.40 on a volume of 6,700 shares. Lanka Ashok was the second biggest gainer percentagewise and yesterday’s new high beat the previous best of Rs. 4,300. The rise also propelled Lanka Ashok to the top 30 most valuable stocks league to rank 28th with a market capitalisation of Rs. 23.1 billion, above multinational Chevron as well as Dockyard.

Dimo also gained by Rs. 6.40 to Rs. 1,601.60 after peaking to a high of Rs. 1,620, Sathosa Motors gained by Rs. 16.30 to Rs. 284, Colonial Motors by Rs. 24.60 to Rs. 305.80 (it hit a peak of Rs. 310) and United Motors rose by Rs. 2.40 to Rs. 157.80 (hit an intra-day peak of Rs. 167). However the counters are somewhat below their 52-week high prices.

Some analysts attributed the spike yesterday to speculative interest since fundamentally the sector’s earnings will be under pressure following the hike in duty. Others said in comparison to high duties and taxes a year ago the current regime remains attractive for buying vehicles.

Lanka Ashok’s rise was linked to rumours that a share split was in the offing. All motor stocks are highly illiquid hence fetch a premium.

Source - www.ft.lk

what about the devident 3.25/= and the ceo yatawara doubling his shares in the firm this fy... ?

Some of the senior members here use PE as the only indicator to determine the future price of stocks. I totaly disagree with this atitude.. There are many other factors to push the share price. Hence when a price of a share is gping up without any suport with accepted factors such as PE etc we must try to find out the reason. Some time it can be a share split,a right isssue or a significant business expansion program or aquisition.Specialy illiquid shares like Ashok, NEH,Morision,Kazoo, there are many reasons to increase the price.

kam2011 wrote:Some of the senior members here use PE as the only indicator to determine the future price of stocks. I totaly disagree with this atitude.. There are many other factors to push the share price. Hence when a price of a share is gping up without any suport with accepted factors such as PE etc we must try to find out the reason. Some time it can be a share split,a right isssue or a significant business expansion program or aquisition.Specialy illiquid shares like Ashok, NEH,Morision,Kazoo, there are many reasons to increase the price.

You're obviously right mate.. but we've gotta wait till they announce these as we're not getting insider information