Motilal Oswal is bullish on Ashok Leyland has recommended buy rating on the stock with a target price of Rs 122 in its research report dated July 12, 2017
Motilal Oswal's research report on Ashok Leyland
In FY17, the CV industry was impacted by regulatory measures like demonetization, shift from BS-3 to BS-4 emission standards, and looming GST implementation. However, during the same year, AL’s domestic M&HCV volumes grew 4.6% (v/s flat CV industry growth). AL launched various products (Captain Tractors, eco version of Captain Tippers, Guru and Sunshine Bus) in FY17, due to which its market share in M&HCV increased to 33.9% from 32.7% in FY16.
We maintain FY18/FY19/FY20E EPS, and estimate EPS CAGR of 27.3% over FY17-20E. AL trades at 19.3x/15x FY18E/FY19E EPS, and EV of 10.5x/8.4x FY18/19E EBITDA. We value AL at ~INR122[9x FY19E EV/EBITDA (in-line with LPA)+ INR14/shar for stake in HLF post 20% hold co discount]. Maintain Buy.
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