Anand Rathi's research report on Ashok Leyland
Surpassing our Rs11.3bn estimate on more-than-expected revenue and less-than-anticipated other expenses, Ashok Leyland’s Q3 EBITDA grew 9% y/y to Rs12.1bn. We expect India’s M&H CV sector to turn positive with 6% growth in Q4, and a 5% CAGR over FY25-27, led by robust bus demand (an 8% CAGR), continuing replacement demand (refer fig 8), infra/economic activity and a favorable base. Exports would record a healthy 12% CAGR, led by recovery in Africa/Asia.
Outlook
The EBITDA margin would increase due to a greater focus on profit (similar to those of peers) and tonnage/non-CV mix. Valuations are reasonable at 12x/10x FY26e/27e EV/EBITDA. We retain a Buy with a lower TP of Rs260 (earlier Rs290), 12x FY27e EV/EBITDA (13x FY27e) and Hinduja Leyland Finance at Rs11/sh.
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