Prabhudas Lilladher's research report on Ashok Leyland
AL’s Q4FY21 results beat our Revenue/EBITDA/Adj. PAT estimates by 8%/29%/66% led by 1) strong volume growth, 2) increasing share of MHCV causing better realizations and 3) operating leverage benefits compensating RM cost inflations. We note improvement in fleet utilization levels post opening of the economy in June. Economic recovery will further improve utilization and drive replacement demand for CV particularly MHCV, in our view. Furthermore, AL is expected to regain its lost share led by strong pickup in new models and recovery in Haulage (~50% share) and Bus segment (~45% share). While we expect RM headwinds to continue, operating leverage and cost control should drive margin expansion by 670bp over FY21-23.
We cut FY22 EPS by 14.3% to factor impact of concurrent lockdowns, while revising FY23 EPS by +4.5% to factor recovery and margin benefits. Maintain ‘BUY’ with revised TP of Rs153 (v/s Rs149 earlier) based on 14x FY23 EV/EBITDA and ~Rs18 for HLF.
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