Buy Ashok Leyland; target of Rs 72 KRChoksey

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26 Aug, 2025 12:21

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Ashok Leyland (AL) Q1FY21 revenue down by 88.5% YoY and (-83% QoQ) to INR 650.9 Cr compare to our estimates of INR 592.30 Cr. M&HCV total volumes were down by 96% YoY to 1021 units, while total volumes of LCV segment declined of 78% to 2793 units. Total Volumes (M&HCV and LCV) were down by 90% to 3814 units. The company reported absolute EBTIDA loss of INR 333.20 Cr in Q1FY21 compare to EBITDA of 537 Cr in corresponding quarter last year. Decline in EBTIDA was on account of higher fixed cost due to lockdown and lower operating leverage. For Q1FY21, AL reported Net loss of INR 389 Cr as compare to net profit of 230.20 Cr in corresponding quarter last year. Decline in profitability was due to poor operating performance and sharp decline in overall revenue.EPS for the quarter stood at INR (1.32) as against INR 0.78 in Q1FY20.

We expect improvement in EBITDA margin and Return ratios on back of better operating leverage, operational efficiency and better product mix. Given the current scenarios, we have revised our estimates and target price accordingly. Since our last recommendation (Buy at a target price of INR 63) on 26th June, 2020, the share of Ashok Leyland advanced ~17%. We have valued the company at a P/E multiple of 16x on FY22 EPS of INR 4.51 to arrive at a target price of 72 resulting into a upside 18% from CMP of INR 61. We maintain an “BUY” rating on the stock.

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