Buy Ashok Leyland; target of Rs 142: LKP Research
LKP Research is bullish on Ashok Leyland has recommended buy rating on the stock with a target price of Rs 142 in its research report dated November 14, 2018.
November 20, 2018 / 01:56 PM IST
LKP Research's report on Ashok Leyland
Ashok Leyland (ALL) reported 25.8% yoy and 21.7% qoq growth in the topline. Volume growth was at 27% yoy and the realizations were down by about 1%. The company increased its market share by 1.5% yoy close to 35% in the Trucks segment and upto 42% in Buses segment. Margins came in at 10.6%, 20 bps higher qoq, and 50 bps higher yoy slightly lower than our expectations as input costs firmed up heavily. RM prices as a % of sales were up to 72.7% as metal prices like steel and aluminum climbed up the spiral. Employee costs as a % of sales went down at 6.8%, while other expenses dipped to 9.9% despite discounting moving up. Below the operating level, other income was lower both yoy and qoq, while depreciation expenses remained flat both qoq and yoy. Due to reduction in tax sops in Pantnagar, the tax rate came in at 29.7% qoq. Net profits however surged by 41.2% yoy as topline and operating profits moved up strongly. Resignation of the company’s MD and CEO Mr Vinod Dasari may act as an overhang on the stock.
At the bottomline, reducing benefits from the PN plant may get offset by lower capex and debt. Considering these positives, we remain positive on the stock. With a cautious stand on volume growth with respect to higher base in H2 last year we remain positive on the stock with maintained estimates target of Rs 142.
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