Buy Ashok Leyland Ltd For Target Rs. 158 By Sushil Finance
Highlights from the Quarter (Q1 FY26)
Consolidated sales were at Rs.8,725 cr, recording a 1.5% yoy growth. Ashok Leyland’s domestic MHCV volumes outperformed the industry growth, with a growth of 2.0% YoY to 25,641 units, compared to industry volumes. MHCV market share, excluding defence, in Q1 this year improved to 31.1%, vis-à-vis 29.8% during the same period last year. The exports volume was at 3,011 units, higher by 29% on YOY basis. Internationally, markets like UK, GCC, Africa and SAARC are doing well, despite all the geopolitical uncertainties. Ashok Leyland products are gaining increasing acceptance in these markets due to the approach of developing strong local presence and building products suiting the local requirements. The company will be launching a slew of new products in the balance of the year in MHCV segment. These include foray into 280, 320 and 360 HP tippers, tractor trailers and multi-axle vehicles with peak power and torque, heavy-duty aggregates and a host of other premium features. Total touch points for MHCV and LCV segments are at 1,073 and 851 respectively and the company aims to cross 2,000 touchpoints for both the product segments in this year.
EBITDA margins improved by 50 bps yoy to 11.1% in Q1FY26. This was mainly on account of the cost savings along with better realization and improvement in the product mix shifting towards medium and heavy vehicle.
Going forward, the management has indicated mid-single digit MHCV volume growth and slightly higher growth in the LCV segment for FY26, led by a stronger 2HFY26E driven by replacement demand, higher government capex and new launches.
OUTLOOK AND VALUATION
With the cost optimization measures by the company and higher realisations, we expect the bottomline to grow faster clip, at 9% CAGR, with FY27E EPS to be Rs. 6.0 and the PAT margin to be 8%. We arrive at a Target Price of Rs. 158, showcasing an upside potential of 17% from current levels with an investment horizon of 18-24 months, with a BUY rating on the stock.
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