Dec 02, 2016 03:25 PM IST | Source:

Buy Ashok Leyland; target of Rs 92: Geojit BNP Paribas

Geojit BNP Paribas is bullish on Ashok Leyland has recommended buy rating on the stock with a target price of Rs 92 in its research report dated December 01, 2016.

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Geojit BNP Paribas' research report on Ashok Leyland

Revenue from M&HCV (Medium & Heavy Commercial Vehicle) accounts for 80% of AL‟s volume is likely to get impacted due to temporary slowdown in the logistics operator‟s business model. We lower our FY17 volume estimate of M&HCV sales, which constitutes 80% of the revenue from 13% 6%. Going forward, M&HCV segment will continue to perform on the back of revival in the infrastructure projects and improvement in the logistics operator‟s profitability owing to lower diesel prices. We expect the AL‟s revenue to grow at 10% CAGR over FY16-18E by factoring 5% lower volume growth in our estimate for FY18, also considering pre-buying on the implementation of BS-IV emission norms by FY17.

At CMP AL is trading at P/E of 18.3x & 14.6x on FY17E & FY18E. Considering the near term headwinds on earnings, we lower our valuation to 18x (Previously 20x) FY18E EPS with a revised target price of Rs 92 and maintain buy rating.

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