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Buy Ashok Leyland; target of Rs 105:Sharekhan

Sharekhan is bullish on Ashok Leyland and has recommended buy rating on the stock with a target price of Rs 105 in its research report dated November 6 , 2015.

November 09, 2015 / 02:35 PM IST
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Sharekhan's research report on Ashok Leyland

Ashok Leyland Ltd (ALL) continued to maintain industry leading growth and outperformed with a growth of 78% in the domestic medium and heavy commercial vehicle (MHCV) segment as against the industry growth of 43.6%. The combined effect of price hikes undertaken, significant operating leverage and favourable commodity prices led to a 475-BPS OPM expansion (YoY) to 12%. The company reported a gain of Rs151.8 crore on account of sale of shares in IndusInd Bank. This gain was negated by a diminution in value of investment in a joint venture with John Deere to the tune of Rs157 crore (negative surprise affecting sentiments temporarily). Adjusted for these exceptional items the profit for the quarter stood at Rs292 crore below our estimate of Rs317 crore and Street’s expectation of Rs325-330 crore.

We have maintained our earnings estimates for FY2016 and FY2017. We have also introduced earnings estimate for FY2018 with this note. ALL is well poised to reap the benefits of the anticipated sustained uptrend in the domestic CV industry over the next two to three years. We have shifted earnings multiple to an average of FY2017 and FY2018. We remain positive on the stock and reiterate our Buy recommendation with a revised price target of Rs105 (earlier Rs98).

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first published: Nov 9, 2015 02:35 pm