Buy Ashok Leyland Ltd For Target Rs. 150 By Emkay Global Financial Services Ltd
Ashok Leyland (AL) hosted a conference call (refer to Press Release link) where it outlined its plan toward investing in the battery ecosystem as well as its technology tie-up with CALB—leading Chinese player in new energy solutions. KTAs: 1) AL targets investing ~Rs3–6bn over the next 2–3Y in localized battery pack production, as part of a larger, Rs50bn 10Y capex roadmap; this roadmap is aimed at building AL’s EV-related capabilities early and positioning it ahead of the long-term e-mobility transition. The company has also set an ambitious net-zero target for CY48 (vs India’s CY70). 2) AL’s primary stage goal is to localize and commence battery pack manufacturing in India by H1CY27, initially catering to captive demand, with plans to expand into PVs, 2Ws/3Ws, and eventually considering cell manufacturing based on EV/BESS adoption and internal capability. 3) Its partnership with CALB is largely technical, with no immediate financial investment, and reflects a step-by-step approach to building battery tech expertise. 4) Given that batteries account for ~30-40% of the cost of an EV, AL aims to achieve stronger cost control toward reducing reliance on imports/external suppliers. While further clarity on the intent is awaited, the investment appears unconvincing at first glance, as it represents a divergence from AL’s core CV business focus. We roll forward our target multiple to Sep-27E while raising our TP by ~7% to Rs150 (Rs140 earlier). Our earnings remain unchanged, and we re-iterate BUY.
AL aspires to gradually build-out a Battery ecosystem for India
AL’s LT strategy is centered on developing in-house expertise, cost control (batteries account for ~30-40% of the cost of an EV), and tech leadership in the fast-evolving battery market. AL is prioritizing technology + manufacturing capability to gain an edge over peers. The first milestone AL aims for is to start manufacturing battery packs in India by H1CY27, initially for own e-CV demand before expanding into PVs, 2W/3W segments, and non-automotive applications such as BESS; eventually, it will advance to cell manufacturing. For this, it announced a ~Rs50bn phased investment plan for the next decade, with ~Rs3-6bn earmarked for coming 2-3Y, for localized pack production.
CALB partnership to anchor battery localization strategy
AL’s partnership with CALB—a leading global new energy player with ~90-100GWh capacity—will start with cell imports and local pack assembly for automotive/nonautomotive applications. The collaboration is technical, with no financial participation from CALB, and the investment will be fully funded by AL. This tie-up gives AL access to advanced battery technology, localization expertise, and exclusive manufacturing rights for select products in India. The final structure will be announced later. AL estimates that with this partnership, it will see ~4-6GWh of captive battery demand over the next 4-5Y, given that pack investments have a payback period of ~4-5Y.
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