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We are positive on the Indian CV space (refer to: A Turning CV Upcycle; TMCV to Lead), as we believe the industry is entering a durable, replacement-led upcycle. We note that CV/MHCV-truck volumes have only marginally surpassed their FY19 highs (~7%/1% above), leaving ample headroom to grow as an ageing fleet drives replacement demand. The runway is backed by strong freight availability and fleet operator economics, in turn driven by improving macros. Underlying retail trends are also robust (MHCV retails rebounding to 26% yoy in Jul-26, vs ~17/11% in Jun/May-26), while the MHCV retail-to-wholesale ratio is healthy at >100% in 1QFY27 (vs ~87/85% in FY26/4QFY26). Demand momentum has carried into 2Q as well (TMCV's Jul-26 dispatches up 37% yoy, with a revival in exports). The operating leverage benefit from rising volumes, along with calibrated price hikes (~5% taken across players in CY26TD), will help drive improvement in margins, return ratios (ROCE of ~39%/45% by FY28E for AL/TMCV), and FCF generation (~10% FCF yield as a % of sales by FY28E), aided by a strong net-cash balance sheet. We maintain BUY on both TMCV (BUY; SOTP-based TP revised to Rs700 from Rs650; market leadership and mid-term optionality from IVECO) and AL (BUY; TP revised to Rs240 from Rs220; attractive play on domestic MHCV recovery, improving HCV retail share), and raise EPS by ~2-4% over FY27E-28E; we introduce FY29E. We are above consensus on EPS by ~16-18%/~17-18% for AL/TMCV over FY28E-29E, reflecting our stronger volume build and the resultant operating leverage flow-through.

A structural play in motion; CV demand reaccelerating in Jul-26

The Indian MHCV space is showing multiple signs of a structural inflection after remaining largely range-bound over the last ~7Y. Despite the post-Covid recovery, FY26 MHCV truck volumes have only marginally surpassed their FY19 peak. Demand indicators, too, have become increasingly favorable following the GST 2.0 rate cuts last year. After a slight moderation in demand through May–June owing to the West Asia crisis, growth momentum has now reaccelerated again into July (up 26% yoy vs 17/11% in Jun/May-26). TMCV's July26 dispatches rose 37% yoy (domestic +28%, international +128%), with every major segment posting double-digit growth. Retail-to-wholesale ratio is also healthy at 100% in 1QFY27 (vs 87%/85% in FY26/4QFY26)

Healthy macros reinforce our confidence on Indian CVs

The CV runway is backed by strong freight availability and fleet operator economics. After rising consistently over the last two decades, average tonnage per MHCVs has begun to stabilize (~19-20 average ton/vehicle) over the last 2Y; if sustained, this could mark an early shift in the MHCV cycle, wherein higher freight demand is increasingly met via higher vehicle deployment rather than higher loading per truck. This, coupled with a supportive macro backdrop (CV credit growth at ~16–18%, healthy financier asset quality, and rising IIP), along with disciplined industry-wide price hikes (~5% taken across players in CY26TD), should further aid volumes, margins, and earnings.

Prefer TMCV for leadership, IVECO optionality; AL for HCV market-share gains

We are structurally positive on the CV space and maintain BUY on both TMCV (SOTP-based TP revised to Rs700 from Rs650) and AL (TP revised to Rs240 from Rs220). We raise our FY27E/FY28E EPS by 4% for TMCV and 3/2% for AL and introduce FY29E. Our estimates build in CV volume growth of ~14.7% in FY27E (implying 13% growth for the remaining 9M). On TMCV, we remain positive given its market-share leadership, superior execution, and medium-term optionality from IVECO (synergy potential across procurement, platforms, and international markets). AL offers an attractive play on domestic MHCV recovery, with improving HCV retail share (~31.6% Jul-26, +300bps vs 3QFY26) providing incremental earnings optionality as the upcycle gathers pace.

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