Buy Ashok Leyland; target of Rs 161: Choice Institutional Equities

Choice Institutional Equities's report on Ashok Leyland

AL delivered another quarter of resilient performance, consolidating its leadership in the domestic MHCV and bus segments while strengthening its foothold in LCVs and exports. MHCV market share stood firm at 31% in H1FY26 (up 50 bps YoY), while LCV share improved to 13.2%, outpacing industry growth. Export volumes surged 45% YoY in Q2FY26, supported by strong traction across GCC, Africa and SAARC markets. The company’s focus on premium product launches continues to enhance its competitive positioning. Upcoming 320HP and 360HP heavy-duty trucks, featuring advanced six-cylinder engines with 20–30% higher torque, are expected to drive margin-accretive growth in mining and construction segments. In the LCV portfolio, the success of the ‘Saathi’ model and the planned launch of a bi-fuel (CNG/petrol or CNG/diesel) variant in the next two quarters would strengthen AL’s addressable market in urban logistics. Additionally, its bus capacity expansion, from 12,000 to over 20,000 units after ramp-up at its AP and Lucknow plants, will support rising domestic and export demand.

Outlook

We revise our FY26/27E EPS estimate upwards by 2.2%/2.9%. We value AL’s core business at 20x (unchanged) on the average FY27/28E EPS and arrive at a value of INR 142. We assign a value of INR 15 to HLFL and INR 4 to Switch Mobility (as detailed in Exhibit 1), leading to a revised target price of INR 161. We maintain our BUY rating on the stock.