Switch Mobility, an EV-focused subsidiary of Ashok Leyland, is looking to raise $200 million through equity for growth capex. Brokerage Motilal Oswal said this could potentially lead to a re-rating of Ashok Leyland, as happened in Tata Motors (TTMT) following the sale of a minority stake in the EV business to TPG.
Let’s say the fund is raised at a $1.6b-1.8b valuation, this means 35-40/share accretion. Brokerage retains its buy rating Shares of Ashok Leyland with a target price of 165, indicating a potential increase of about 30% from current levels. auto stock is more than 10% in a period of one year.
“While electrification poses a threat to Ashok Leyland’s 37-40% market share in ICE buses, it provides an opportunity for AL to increase its market share to 11% in ICE LCVs. In addition, it targets a huge opportunity globally in e-buses and e-LCVs,” the note said.
However, according to Motilal Oswal, loss of road share in freight traffic from the upcoming DFCC, loss of market share and margin reduction as a result of increasing competitive intensity, and loss of market share due to electrification in buses and LCVs act as major risks. Can do.
“Unlike previous cycles, Ashok Leyland is on a strong footing with a low cost structure and reasonable debt, and is focused on adding new revenue/profit pools. The company’s valuation at 19.2x FY24E EPS and 11.4x FY24E EV/EBITDA is in early recovery stages, and does not fully reflect its focus on adding new revenue streams and profit pool (as well as its EV business),” the brokerage said. he said.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.