Ashok Leyland (AL)'s 2QFY22 performance was decent despite headwinds such as declining market share and cost inflation. AL's performance was comparable with that of peers despite 4.6pp QoQ decline in M&HCV market share, led by good growth in the LCV and export businesses. AL offers a pure-play on CV cycle recovery, with focus on expanding revenue pools. We downgrade our FY22E/FY23E EPS estimates by 11%/5% due to a weaker mix. We increase the EV/EBITDA multiple from 11x to 12x (in line with TTMT's CV business), as we value it on early-cycle earnings. Maintain Buy, with TP of INR180 (12x Sep'23E EV/EBITDA + INR14/sh for NBFC).
OutlookValuations at 31.4x/13.8x FY22/FY23E EV/EBITDA are in an early recovery cycle. This does not fully reflect AL's focus on adding new revenue streams and profit pools. Any fundraise in Switch Mobility (EV business) could serve as a re-rating catalyst. We maintain a Buy rating, with TP of INR180.
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