Ashok Leyland - Structural Story Intact Despite Near Term Moderation In Demand: Nirmal Bang

Nirmal Bang Report

We hosted the management of Ashok Leyland Ltd. at our virtual investor conference. The macro environment remains favorable for commercial vehicles. In the near term, there is likely to be some moderation in demand due to Lok Sabha elections, but the long term CV upcycle remains intact.

Currently, the bus segment is doing better than trucks.

The management reiterated its focus on profitability and is undertaking strong cost-control initiatives. Prices have been increased by 1-1.5% every quarter for the past few quarters.

There was some loss in market share in Q3 FY24, but the strategy to regain market share will definitely not be discounting. Ashok Leyland is focusing on expanding its distribution network and delivering quality products while also taking into account total cost of ownership for the customer.

We value the Auto business at 10 times December-25E enterprise value/Ebitda and Hinduja Leyland Finance Ltd. at one time price to book to arrive at a target price of Rs 214. We maintain 'Buy'.

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