Buy Ashok Leyland target of Rs 137: Geojit

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Geojit's research report on Ashok Leyland

Ashok Leyland (AL) is the second-largest Commercial Vehicle (CV) manufacturer in India. It has a strong presence in the truck segment with a market share of 29% as of FY21. Q2FY22 revenue grew by 51% QoQ due to pick up in the M&HCV demand and strong growth registering in the LCV segment. We expect the margin to improve going forward owing to reduction in the commodity cost and better cost management. We believe the economic activities to recover gradually at current level and expect meaningful pick up in H2FY22 due to seasonality, improvement in core economic indicators and easing restrictions. We believe AL is likely to gain market share owing to new models in ICV (Intermediate CV) & CNG trucks and LCV brand Bada Dost. Positively, AL is carrying robust capex plan in Electric vehicle under the UK Subsidiary ‘Switch’ and to use India as export hub. Considering the positive announcement by the company and Govt.’s intent to kick start the Infra development we except the valuation to continue at current level, and reiterate our buy rating.

Outlook

We value AL at 15x EV/EBITDA on FY23E and reiterate our buy rating with a target of Rs.137.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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