Buy Ashok Leyland; target of Rs 285: Deven Choksey

Deven Choksey's research report on Ashok Leyland

Ashok Leyland’s volume stood at 59,176 units, an increase of 4.9% YoY (+27.5% QoQ). Revenue stood at INR 119.1 Bn, up 5.7% YoY (+25.6% QoQ), in-line with our estimates (+2.0%). EBITDA stood at INR 17,910 Mn., up 12.5% YoY (+47.8% QoQ), above our estimates by 14.5%, driven by operating expenses. Adjusted net profit stood at INR 12,595 Mn., up 29.8% YoY (+65.3% QoQ), sharply above our estimates by 20.4%, driven by better operational performance and higher other income. We have revised our FY26E/FY27E EPS estimates by +1.3%/+2.2%, respectively, reflecting higher growth momentum, improving industry outlook, and sustained demand for MHCVs and buses. Moreover, our estimates bake in margin resilience led by better product mix, positive operating leverage. We expect the revenue/EBITDA/Adj. PAT to grow at 8.9% /15.5% /17.4% CAGR, respectively, over FY25-FY27E. Currently, the stock is trading at a PE multiple of 18.5x/16.0x based on FY26E/FY27E EPS, respectively.

Outlook

We value Ashok Leyland at 19.0x FY27E EPS, implying a target price of INR 285. We reiterate our “BUY” rating on the stock.