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Ashok Leyland share price gains after CLSA upgrades stock to buy

Jefferies has maintained a buy on the stock with target of Rs 75 per share while CLSA has upgraded the stock to buy from underperform and has raised target to Rs 80 from Rs 53 per share.

August 14, 2020 / 02:16 PM IST

Ashok Leyland share price gained 2 percent intraday on August 14, a day after the company came out with its June quarter results.

The Hinduja Group flagship firm on August 12 reported a consolidated net loss of Rs 388.82 crore for the first quarter ended June 30, owing to the coronavirus pandemic. The commercial vehicle maker had posted a net profit of Rs 274.96 crore for the April-June 2019 quarter.

Revenue from operations in April-June 2020 significantly declined to Rs 1,486.04 crore as compared with Rs 6,588.23 crore in the year-ago period, Ashok Leyland said in a regulatory filing.

Ashok Leyland Chief Financial Officer Gopal Mahadevan said this is an exceptional quarter not just for the industry but also for the entire economy. "We have used this time to drive disruptive cost efficiencies and productivity measures."

The stock price has gained over 24 percent in the last three months and was trading at Rs 60.50, down Rs 0.55, or 0.90 percent at 10:29 hours. It touched an intraday high of Rs 64.75 and an intraday low of Rs 60.45, at the time of writing this copy.

Jefferies has maintained a buy rating on the stock with a target of Rs 75 per share. It is of the view that trucks continue to be in severe downturn and haven’t seen meaningful pick-up yet and expects a rebound in FY22-23 on an exceptionally low base, according to a CNBC-TV18 report.

Competition is unlikely to worsen given Tata Motors is facing severe pressures at JLR too. It also expects free cash flow to be negative in FY21 but subsequently improve in FY22-23.

CLSA has upgraded the stock to buy from underperform and has raised target to Rs 80 from Rs 53 per share. It is of the view that estimated truck industry peak-to-trough volume decline at 68 percent is highest in three decades. Forecast FY21-23 truck CAGR at 34 percent which should revert FY15 volume.

Channel checks indicate a pick-up in new truck buying in Q4FY21. The brokerage firm has cut FY21 EBITDA by 52 percent to factor near-term weakness, leave FY22 broadly unchanged.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.

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first published: Aug 14, 2020 10:59 am