Shares of Ashok Leyland Ltd rose nearly 8 per cent in trading on Monday morning. The stock was trading at Rs 137.70 on the NSE at 02:35 pm (IST) on Monday, up 5.64 per cent from the previous close. The Street also lauded the huge revenue jump in the company’s quarterly earnings. The stock quoted a 52-week low of Rs 93.2 and a high of Rs 153.4.
The commercial vehicle maker surpassed Street expectations in all respects, posting its earnings for the quarter ended March 2022. The profit came in much higher than the expectation at Rs 901.4 crore, while the revenue saw a huge jump of 25 per cent in a year-on-year (YoY) basis to Rs 8,744 crore.
The company’s executive chairman Dheeraj Hinduja believes that the commercial vehicle (CV) industry is improving in tandem with the macroeconomic environment. “We have seen a recovery in the fourth quarter and the overall performance has been very good. The commercial vehicle industry is improving due to improving macroeconomic environment and healthy demand from end user industries,” said Hinduja.
Hinduja attributes the recovery to the MHCV (medium and heavy commercial vehicle) segment, which he feels is turning the tide in the company’s favour.
“The MHCV segment is leading the recovery due to growth in key sectors like construction and mining, agriculture, increase in capital outlay for infrastructure projects and increase in replacement demand,” he said.
Ashok Leyland Shares: Here’s What Brokerages Are Saying
Jefferies maintains a ‘buy’ rating on the stock, raising the target price from Rs 130 to Rs 160 as it expects to move higher.
Research firm Credit Suisse has retained the outperform rating on the stock and raised the target price to Rs 169 per share.
As per a CNBC-TV18 report, the broking firm has retained the outperform rating on strong cyclical improvement in domestic CVs.
Axis Securities in its note said: “Ashok Leyland Limited (AL) reported a strong Q4FY22 performance, beating our as well as off road estimates, with healthy recovery primarily in the Commercial Vehicle (CV) industry – Due to better product mix and growth in ASP.net revenue stood at Rs.8,744 crore (our estimate: Rs.8,205 crore) as against Rs.7,000 crore in Q4 FY2011, driven by strong growth in MHCV segment and export business Total volumes grew by ~11% YoY to 48K units along with 13% growth in ASP led by a rich product mix and price increases post transition to BS6 norms The company’s gross margin shrank by 135bps YoY to 21.8% (our estimate: 22 per cent) due to higher RM cost inflation.
“We expect the improvement in CV demand to sustain further momentum in FY23E and FY24E. The medium-term outlook remains strong (1) improving macro-economic factors; Government’s emphasis on increased fleet utilization and infrastructure and scrappage policy to fuel replacement demand; and (2) a potential pick-up in bus demand as travel restrictions ease and schools, colleges and offices reopen,” Axis Securities said. Hence, we retain our BUY rating on the stock and keep the TP of Rs 160 unchanged as we value the stock at 19x the FY24E EPS, he said.
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