The commercial vehicle (CV) manufacturer Ashok Leyland reported a net profit ₹933.69 crore in the fourth quarter of FY24, registering a 16.73% growth from ₹800 crore in the year-ago quarter, led by strong demand.
The Hinduja Group’s flagship company reported consolidated revenue from operations of ₹13,577.58 crore in Q4FY24 as against ₹13,202.55 crore, YoY.
The results were backed by an all-round performance with contributions from all business verticals, Ashok Leyland said. In the M&HCV Bus segment, the company emerged as market leader with a market share gain of 5.8% points. Overall CV volumes at 194,553 units were very close to the previous high of 197,366.
“We continue to be optimistic about our industry prospects in the short to medium terms backed by anticipated robust growth in the Indian economy,” said Dheeraj Hinduja, Chairman, Ashok Leyland.
Analysts have maintained their positive view on Ashok Leyland shares on the back of volume growth expectations, industry growth prospects and cheap valuations.
Here’s what brokerages have to say about Ashok Leyland shares and Ashok Leyland Q4 results:
Motilal Oswal
Motilal Oswal expects a recovery in CV demand from 2HFY25 onwards as structural demand drivers remain intact.
Ashok Leyland is the best investment choice in the CV growth cycle, as it has positioned itself to expand revenue/profit pools. Moreover, its focus on profitable growth driven by lower discounts, a better mix, and cost control measures should bode well for EBITDA margin expansion over FY24-26E, Motilal Oswal said.
The brokerage raised its FY25E and FY26E earnings per share (EPS) estimates by 7% and 6% to factor in a better gross margin and a lower interest burden. It reiterated a ‘Buy’ rating on Ashok Leyland shares with a target price of ₹245 apiece.
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Antique Stock Broking
In terms of demand, we expect the demand momentum to pick-up post the elections led by better macro conditions and replacement demand kicking in. Freight availability continues to remain strong and it expects the same to continue on the back of a strong capex cycle lying ahead. Further, any cut in interest rates can drive the demand significantly. Volume growth with sustained focus on profitability should augur well for earnings growth, Antique Stock Broking said.
The brokerage models a volume CAGR of 6% over FY24–26E. It revised FY25 and FY26 margin estimates by 120 bps and 70 bps and maintained a ‘Buy’ rating on the Ashok Leyland stock with a target price of ₹248.
Emkay Global Financial Services
Emkay Global Financial Services upgraded Ashok Leyland shares to ‘Buy’ from ‘Sell’ and raised the target price to ₹250 per share, on upcycle potential from FY26.
We contend that after 2 likely flattish years (FY23-25E), the CV cycle (which has been more of ‘time correction’ in nature vs. the usual sharp volume drop), may turn positive from FY26. Amid intact fleet operator profitability, we believe the pricing power/margin expansion for CV OEMs will sustain; this drives FY26E EPS up ~19%, said the brokerage firm.
Despite the 21% increase in stock price in three months, Ashok Leyland shares remain among the least-expensive OEMs, it added.
Nuvama Institutional Equities
Factoring in better pricing and margins, Nuvama Institutional Equities increased FY25E and FY26E EBITDA estimates by 5% and 4%. After strong growth in domestic MHCVs over FY21–24 (49% CAGR), it forecasts a subdued volume performance in FY25, owing to a slowdown in government infra spends, increasing competition from Railways and a high base.
The brokerage builds in a muted revenue and EBITDA CAGR of 2% and 1% over FY24–26E. It maintained a ‘Reduce’ call and increased Ashok Leyland share price target to ₹180 from ₹168 earlier.
At 10:00 am, Ashok Leyland shares were trading 1.31% higher at ₹213.30 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 27 May 2024, 10:00 AM IST
