Ashok Leyland Ltd. (ASHLEY) reported ~25.2% YoY jump in net sales in 2QFY19 to INR 76080 mn due to 22.2%/41.6% growth in M&HCV/SCV volume. EBITDA (excl. other income) has grown by 32.2% to INR 8059 mn, while EBITDAM improved by 56.8 bps despite increase in RM cost on the back of change in accounting norms for warranty and tighter cost control. PAT for the quarter stood at INR 4596 mn (Up 37.5% YoY). We expect ASHLEY to register Revenue/EBITDA/PAT growth of 8.4%/12.2%/14.1% between FY18 and FY20. At CMP of INR 110, the stock is trading at 8.6x FY20E EV/EBITDA.
OutlookWe have valued standalone business at 12x FY20 EBITDA and assigned INR 4 for the stake in HLFL and recommend BUY with target price of INR 147.
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