Ashok Leyland Limited (ALL) is the second largest manufacturer of commercial vehicles (CV) in India with market share of 18.8% in domestic CV market and 37.4% in Medium and Heavy Commercial Vehicles (M&HCV) market. Globally, ALL is fourth largest manufacturer of buses in the world and the 16th largest manufacturer of trucks. ALL have seven manufacturing plants in India and one plant at Ras Al Khaimah (UAE). Their annual installed capacity stands at 180,000 vehicles in India.
OutlookWe estimate EBITDA margins to increase to 13.3% in FY20E and net profit to grow at a CAGR of 29% to INR 2,614.6 crores in FY20E led by effective cost management and negligible interest costs. We have a BUY rating with target price of INR 155.7 based on SOTP (10x EV/EBITDA FY20E + 62% stake in HLFL).
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