Ashok Leyland Ltd. share price target

Ashok Leyland (AL)'s 2QFY22 performance was decent despite headwinds such as declining market share and cost inflation. AL's performance was comparable with that of peers despite 4.6pp QoQ decline in M&HCV market share, led by good growth in the LCV and export businesses. AL...

About the stock: Ashok Leyland (ALL) is a pure-play CV manufacturer domestically, with FY21 market share at 16.3%. The company is present in M&HCV trucks and buses as well as LCV goods segments. FY21 product mix LCV goods 48.3%, trucks 45.8%, buses 5.6%...

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. Q1FY22 revenue de-grew by 58% QoQ (Not comparable) due to production lockdown and lower construction activity. We expect the margin to improve going forward owing to pick up in the construction activity and improvement in retail sales. We expect the economic activities to recover gradually at current...

AL's Q1FY22 revenue came at Rs 29.5b (-58% qoq, PLe 28.9b) led by 2%/-59% growth in ASP/volumes. Gross Margins at 25.9% (+280bps QoQ, PLE:22.2%) surprised positively, led by price hikes and mix improvement. However, higher fixed costs & oneoffs (R&D;, MTM Loss and CSR) led to EBITDA loss. We note improvement in fleet utilization levels post opening of the economy...

Losses in Q1, but demand recovery may lead to a strong bounce back in H2 FY22 and FY23 Ashok Leyland (AL) reported losses in Q1 at 2.8 bn, which were lower as compared to losses of 3.9 bn reported in the base quarter. The realizations were down by 4% yoy and up by 3% qoq on price hikes taken during the quarter sequentially. The company's market share more or less remained stable at 27% despite the southern markets getting impacted. LCV market share saw a...

Q1 revenue and gross margin beat our estimates but lower operating efficiency crimped profitability

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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. Q4FY21 revenue grew by 45%QoQ due to recovery in the volume by 32%. This was largely attributed to the pick in the construction activities & E-Commerce business (LCV segment). Despite steep increase in RM price, on a sequential basis margin...

We retain our Buy rating on the stock with TP of Rs 150 (Rs. 145 earlier) valuing the stock at 18x its FY23E EPS.

MHCV market share improved to 28.9% in Q4FY21 (v/s 27.6% in Q4FY20). AL's Q4FY21 results beat our Revenue/EBITDA/Adj. PAT estimates by 8%/29%/66% led by 1) strong volume growth, 2) increasing share of MHCV causing better realizations and 3) operating leverage benefits compensating RM cost inflations. We note improvement in fleet utilization levels post opening of the economy in June. Economic recovery will further improve utilization and drive replacement demand for CV particularly MHCV, in our...