CLSA sees 15% downside on Ashok Leyland, margins may tumble on discount risks

Over the past year, shares of Ashok Leyland have gained around 27 percent.

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26 Aug, 2025 12:21

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Hinduja Group flagship company  shares slipped 3 percent in early trading after a downgrade by international brokerage CLSA, which changed its rating from "outperform" to "underperform."

The brokerage also slashed its price target for Ashok Leyland from Rs 258 to Rs 188, which suggests a potential decline of 15 percent from the previous session's closing price.

CLSA noted that a nearly 10 percent decrease in domestic truck sales during the first half of financial year 2025 indicates the beginning of a downturn in the CV sector, which is expected to continue until FY2026.

At 10.15 am, Ashok Leyland shares were quoting Rs 217.23 on the NSE, down 2.4 percent following the downgrade.

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Domestic truck sales are declining due to an oversupply in the road freight market following strong growth between fiscal years 2022 and 2024. CLSA expects a year-on-year decline of 5 percent in Medium & Heavy Commercial Vehicle (M&HCV) volumes for fiscal years 2025 and 2026.

Ashok Leyland is facing challenges with shrinking scale and increased discount risks, which could lead to a 200 basis point drop in margins, down to 10.4 percent by fiscal year 2026 from 12.4 percent two years ago.

As a result, CLSA has lowered its EPS forecasts for Ashok Leyland for fiscal years 2025, 2026, and 2027 by 12.6 percent, 34.9 percent, and 23.5 percent, respectively.

On October 8, Ashok Leyland began delivery of electric trucks to Billion Electric Mobility (Member of Group BillionE), a top official said on Monday. The city-based company had bagged a contract to supply 180 electric trucks to Group BillionE which would be operated in the Chennai-Bengaluru, Chennai-Vijayawada routes.

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