Ashok Leyland's Earnings Estimates Cut By CLSA On Falling Volume Assumption
However, the brokerage's FY25 estimates are "largely unchanged".
CLSA Ltd. has reduced Ashok Leyland Ltd.'s earnings estimates by 3.3%, citing a decrease in volume assumption. However, its FY25 estimates are "largely unchanged".
The brokerage maintains a 'buy' rating for the company, with a target price of Rs 238 apiece, based on 11 times EV/Ebitda. "Our earnings are higher than consensus due to higher Ebitda margin assumptions," it said in a report.
Based on the strong freight rates, CLSA sees the commercial vehicle cycle to continue over the next few years. Robust demand for freight, heavy trucks and LCV will continue, it said.
The brokerage expects 6%/10% year-on-year volume growth for Ashok Leyland's heavy trucks segment. The auto manufacturer's market share in the segment will be stable in the 30-32% range, it said.
Tonnage growth in trucks is higher than the volume growth, CLSA noted. "The MHCVs tonnage has already surpassed the previous peak of FY19, but the volumes are still lower than FY19 levels."
Freight rates have grown by 60% from pre-Covid levels and e-way bill is increasing in double-digits, the report said. CLSA expects strong growth in core industries, like cement and steel, increase in government spending on infrastructure and improvement in industrial activity.
Shares of Ashok Leyland were trading 1.94% up at Rs 178.65 apiece, compared to a 0.57% advance in the NSE Nifty 50 at 10:49 a.m. on Wednesday.
