Ashok Leyland Ltd. share price forecast

Strong YoY growth on a low base, LCV volumes impacted by semiconductor shortage: For Q1FY23, Ashok Leyland reported revenue of INR 72,229 Mn, an increase of 144.8% YoY while declining by 17.4% QoQ. Total volumes for the quarter were at 39,651 units, a growth of 120.4% YoY and a decline of 18.6% QoQ

CreditAccess Grameen: CreditAccess Grameen (CREDAG) reported steady operating performance with NII/PPOP growth of 35%/34% YoY. Disbursements growth was muted during the quarter (-63% QoQ) due to disruptions related to transitioning to RBI's new guidelines on MFI lending, a trend witnessed across other MFI lenders as well. Portfolio stress continued to recede further, with PAR-0 now at 3% (from the peak of 30.6% in Q1FY22) and GNPA for the consolidated entity at 3.1%, indicating near-normalised credit costs, going forward. Having fixed the issues around implementation of the new MFI guidelines, the management remains upbeat about increasing the pace of new customer additions and loan growth guidance of 24-25%. We tweak our FY23E/FY24E earnings estimates for higher loan growth and maintain BUY, with a revised TP of INR1,047 (3.0x Mar-24 ABVPS). Our implied multiple reflects CREDAG's high cross-cycle potential RoE and a very conservative approach to an inherently risky business. CDSL: CDSL posted a weak quarter, primarily on the margin front, while revenue growth of 2.6% QoQ was better than expected but the pace of growth has moderated (six-quarter CQGR of 8%). Revenue growth was impacted by a drop in transaction charges (market activity) and online data charges (lower KYC fetches). The significant jump in annual issuer charges, boosted by higher retail folios, was a surprise, but it's an annuity revenue stream and will support growth for FY23E. The pace of BO account addition has moderated (incremental addition down 35% YoY) but CDSL continues to gain market share (~71%). The margin disappointment was due to higher bonus pay-out...

We maintain our BUY rating on the stock, keeping the TP of Rs 160 unchanged, valuing the stock at 19x its FY24E EPS, implying an upside of 23% from CMP.

Prince Pipes: We maintain BUY on Prince Pipes with a revised target price of INR 875/sh (18.5x its Mar-24E EBITDA). In Q4FY22, volume rebounded 9% YoY and moderated the EBITDA/APAT fall (amid gross margin compression) to 4/9% YoY. We continue to like Prince for its large product portfolio and robust pan-India distribution (unit EBITDA at an all-time high of INR 30/kg in FY22). Despite the temporary surge in resin inventory, leverage remains comfortable. Ashok Leyland: In Q4, Ashok Leyland's (AL) margin improved 130bps YoY to 8.9%, led by (1) 11% YoY volume growth and (2) 13% YoY realisation growth. On account of improved margin, PAT (adjusted for one-off gains) came in ahead of estimate at INR4.3bn. CV demand continues to be upbeat and we expect the MHCV goods industry to post 25% growth in FY23. However, AL may find it difficult to recoup lost market share in CVs since the industry mix is shifting to ILCV segment and CNG (within ILCVs), and the company has been traditionally weak in this segment and late in launching CNG variants. Also, we do not expect margin to revert to the previous peak, as the top-3 players fight for gaining market share in each of the key segments (both TTMT and AL target to outperform industry growth in FY23). Intense competition in the industry is also visible in the fact that despite demand recovering extremely well in H2FY22, discounts remain at record high levels. On account of expensive valuation, we reiterate SELL on AL. Alkyl Amines: We maintain SELL on...

AL has witnessed a steep erosion in market share over the last two years led by: a) Covid-induced adverse impact on bus sales, b) lack of CNG models in ICV portfolio, c) portfolio gap in high power M&HCV segment and d) higher decline in southern region (AL has highest market share) sales v/s other regions. ALs' domestic M&HCV market share recovered ~3.6pp/4.3pp QoQ to 26.1%/30.4% in 3QFY22/4QFY22. This is further expected to improve driven by recovery in bus segment, plugging the product gaps (CNG model launch in ICV portfolio in Feb-22 and high power model launch in M&HCV segment in Dec21) and revival in the Southern region....

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. Q3FY22 revenue grew by 24% QoQ due to pick up in the LCV demand and strong growth registering in the M&HCV segment. However, the margin came lower on account of steep rise in raw material cost. We expect the price to show some respite at current level owing to softening commodity price....

Resurfaced chip availability concerns amid geopolitical issues Russia is the largest producer (~40% share in global production) of rare earth metal palladium, which is used in manufacturing of semiconductor. Further Ukraine is the largest producer of neon gas, which is another important component for semiconductor (chip) manufacturing. Therefore, any supply chain disruption of these critical raw materials in this space would impact the availability of chips, resulting in an adverse impact on OEM volumes and associated productivity. Rise in Brent crude to impact margins as well as demand...

We tweak our estimates downwards to factor in near-term headwinds and lower volumes. We maintain our BUY rating on the stock and value it at 18x FY24E EPS to arrive at a TP to Rs 160 (Rs 175 earlier), implying an upside of 29% from CMP.