Accumulate Ashok Leyland; target of Rs 30: PLilladher

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Accumulate Ashok Leyland; target of Rs 30: PLilladher

Prabhudas Lilladher is bullish on Ashok Leyland and has recommended accumulate rating on the stock with a target of Rs 30 in its February 2, 2012 research report.

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Prabhudas Lilladher is bullish on Ashok Leyland and has recommended accumulate rating on the stock with a target of Rs 30 in its February 2, 2012 research report.

"Ashok Leyland (AL) reported growth of 29.3% YoY in its top-line at Rs28.8bn (PLe: Rs30.2bn). Volume for the quarter grew by 27.1% YoY, whereas average realisation grew by 1.8% YoY. Average realisation/vehicle resulted in a negative surprise, with a ~6% QoQ decline mainly hinting towards higher discounting on account of slowdown in demand. Spare revenues grew by 15.6% YoY to Rs1.8bn, whereas engine sales revenue grew by 21.5% YoY to Rs790m. On a QoQ basis, EBITDA margin (adj. for a forex loss of Rs150m) declined by 290bps to 7.8%. Employee expenses increased by 140bps QoQ on account of a one-time charge of bonus payment of Rs160m. At the same time, the AMC contract for DTC to the tune of Rs300m pertaining to FY12 was reflected in other expenditure. As a result, EBITDA stood at Rs2.2bn below our estimate of Rs2.5bn. PAT growth of 88.9% YoY was higher than the 35.7% YoY growth in EBITDA on account of lower tax rate (on account of higher R&D spend and MAT credit led)."

"According to the management, tractor, trailer and Multi Axle Vehicle (MAV) segments have witnessed de-growth, whereas Tipper segment has seen a growth of 30%+ during the quarter. Inventory during the quarter stood at 9,000 units compared to 9,500 units in Q2FY12. AL sold 3,600 units of the new LCV 'Dost' since its launch in October 2011. YTD FY12 production at Uttarakhand stood at 22,130 units. The loan on the books increased to Rs36bn compared to Rs33bn on account of working capital requirement."

"We expect a muted 5% growth in M&HCV volumes in FY13E on account of slowdown in the truck and bus segment. We have modelled a volume of 27,000 units for LCV 'Dost' in FY13. However, with Q4FY12E expected to be a strong quarter in terms of volume and profitability, we maintain our 'Accumulate' call on the stock with TP based on 10x FY13E EPS," says Prabhudas Lilladher research report. 

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