For Q3FY23, Ashok Leyland’s revenue surged 63% YoY to Rs90.3bn, slightly above estimates. EBITDA grew strongly by 256% YoY to Rs8bn, 17% above our estimate due to better revenue and gross margin beat. Our FY23-25E EPS estimates are broadly unchanged, despite increased EBITDA estimates, owing to higher tax rate assumptions. We expect the domestic CV industry’s growth at 34% in FY23E, and the uptrend is likely to endure with an 8% CAGR during FY23-25E, driven by better macros, government’s thrust on infra spending, and replacement demand.
OutlookWe expect Ashok Leyland to increase its market share from 16% in FY22 to 19% in FY25E, led by better growth in higher tonnage categories/buses and new products. We reaffirm Buy with a TP of Rs183, based on 12x EV/EBITDA on FY25E estimates and Hinduja Leyland Finance’s value of Rs7/share.
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