Hold Ashok Leyland; target of Rs 120: SPA Securities

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SPA Securities' report on Ashok Leyland

Ashok Leyland (AL) Standalone revenue increased 19.9% YoY at INR 48.1 bn. Realizations improved ~12% YoY and was flat QoQ. Volume increased ~7% YoY/ 72% QoQ to 3.8k units. Despite favourable mix of 50% share of MHCV, EBITDA margin came in at 5.3%. EBITDAM was impacted due to impact of higher raw material cost. EBITDA for the quarter stood at INR 2.5 bn, AL had a onetime exception loss of INR 460mn due to VRS. Adjusting for that, PAT for the quarter stood at INR 267 mn (-11%YoY), due to higher depreciation. Net debt for the company reduced from INR30.8bn in 2QFY21 to INR 28.8bn in 3QFY21.

Outlook

Considering bottoming out in the domestic M&HCV sales volume, we value ASHLEY's standalone business at 15x FY22 EV/EBITDA and assign INR 8/sh for HLFL stake and recommend HOLD on the stock with a target of INR 120.

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