Ashok Leyland Q1 Results Review - Focus Remains On Profitable Growth: Nirmal Bang

Nirmal Bang Report

We resume coverage on Ashok Leyland Ltd. with Accumulate rating with June-26 target price of Rs 268 valuing core business at 13 times June-26 enterprise value/Ebitda and Hinduja Leyland Finance Ltd. business at Rs 14/share implying the PE of 19 times at +1SD above long term average PE.

Our cautious stance is anchored to recent runup in the stock price. We however, remain constructive on the business led by-

Demand revival in commercial vehicle after election led slowdown: Over last few months CV industry was facing election led slowdown and high base of H2 FY24. However, we believe long term drivers for CV volumes remain intact led by-

1. Continuing focus on infra spending,

2. Fleet operator’s profitability remaining high,

3. Replacement demand led by ageing fleet population.

Further we believe light commercial vehicle volumes to also recover on the back of pickup in the consumption. We build in the overall volume CAGR of 6% over FY24-27E.

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