Hold Ashok Leyland; target of Rs 58: ICICI Direct

ICICI Direct recommended hold rating on Ashok Leyland with a target price of Rs 58 in its research report dated June 26, 2020.

Broker Research

June 27, 2020 / 12:21 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on Ashok Leyland

Ashok Leyland (ALL) reported a better-than-expected QFY20 operational performance amid challenging volume scenario. Standalone revenues at Rs 3,838 crore were down 56.6% YoY, with ASPs rising 1.3% YoY, 17% QoQ to Rs 15.1 lakh/unit. Total CV sales volumes in Q4FY20 were at 25,490 units (down 57% YoY), with LCV to MHCV mix at 34:66 vs. 42:58 in the previous quarter. Reported EBITDA margins at 4.8% were down 84 bps QoQ despite 240 bps gross margin expansion amid 390 bps rise in employee costs on percentage of sales basis. ALL reported loss at PAT level to the tune of Rs 57 crore, largely tracking impairment charges on equity investments.

Outlook

For ALL, muted volume outlook is also expected to weigh on margins in FY21E, with recovery on both fronts pushed back to FY22E at the earliest Consequently, return metrics are also expected to be subdued (<10%) till FY22E. We assign HOLD rating to ALL, valuing it at Rs 58 (SOTP; 10x FY22E CV EV/EBITDA, 1.5x P/B for investments).