Ashok Leyland Stock At Record-high After Q1 Earnings
LKP Securities maintains ‘BUY’ with a raised target price of Rs 284 (valuing at 21 times FY 26E earnings)
The stock of Ashok Leyland traded at record-high levels of Rs 258 in the Monday trading session after the auto firm recently declared its first quarter (Q1) corporate earnings.
Ashok Leyland stock traded at Rs 257 with 4.6 per cent gain in the morning session on the National Stock Exchange (NSE).
Ashok Leyland reported topline growth of 5 per cent year-on-year (YoY) and a decline of 24 per cent quarter-on-quarter (QoQ) on seasonality. Volumes during the quarter saw a growth of 6 per cent YoY growth.
The company witnessed good growth in bus market share. EBITDA margins moved up to 10.6 per cent up by 60 bps YoY from 10 per cent. There was a sequential fall in margins by 350 bps. This was due to increased commodity costs, unfavourable product mix and a one-time expense sitting in other expenses.
Medium and heavy commercial vehicles (MHCV) segment grew at 10 per cent growth in Q1, on a lower base of last year and a 50 per cent growth in the bus segment. However, the MHCV trucks segment posted a decline of 2 to 3 per cent, due to elections in the country leading to lower demand.
However, underlying drivers such as infrastructure and mining, construction and demand from big fleet operators for transportation of cement, steel, coal, iron ore etc. is going at a steady pace.
The company is also gaining orders from the fleet owners mainly from the e-commerce and the logistics industries. The firm has a growing order book for its EV buses from places like Delhi, Bangalore, UP and other cities as well and has received LOIs of 10,000 buses.
The deeper penetration has led to higher sales in Northern and Eastern parts of the country as well where Ashok Leyland traditionally has a low presence. The company has been continuously adding dealerships and service centres across India. The company plans to touch 1000 dealers and service centres soon, mainly led by North and East India.
Outlook and valuation
Brokerage firm LKP securities believed volume growth in MHCVs to remain subdued in mid-term, while bounce back in Q4 and grow strongly in FY 26. Buses shall grow within the segment at a stronger pace mainly on EV demand.
Gol's continuous thrust on capex and strong Infrastructure outlay shall ensure MHCV to lead a comeback. LCV demand is in place and shall grow at mid to higher single digit in FY 25. Also on the back of improving margin profile, the brokerage maintained ‘BUY’ with a raised target price of Rs 284 (valuing at 21 times FY 26E earnings).
Stock Performance
Ashoke Leyland stock price grew 41.4 per cent in the year 2024 so far which is exactly at par with the sectoral index, Nifty Auto returns of 41.3 per cent year-to-date (YTD).
