Target: ₹290
CMP: ₹224.24
Surpassing our ₹920 crore estimate on the better-than-expected gross margin, Ashok Leyland’s Q2 EBITDA slipped 6 per cent y-o-y to ₹1,020 crore. We expect India’s M&H CV sector to turn positive with 6 per cent growth in H2 and clock a 7 per cent CAGR over FY25-27, led by robust bus demand (an 8 per cent CAGR), continuing replacement demand, infra/economic activity (order awarding is robust) and the favourable base.
Exports would record a strong 12 per cent CAGR, led by recovery in Africa/Asia and the low base. The EBITDA margin would rise due to the greater focus on profit (similar to peers) and the tonnage mix. We introduce our FY27e, with 11/14/17 per cent revenue/EBITDA/PAT growths. Valuations are reasonable at 18x FY26/15x FY27. We retain a Buy with a large price of ₹290, 13x FY27e EV/EBITDA (earlier ₹290, 13x FY26e) and Hinduja Leyland Finance at ₹11/sh.
We expect 7/11 per cent revenue/EBITDA CAGRs over FY24-27. We lower our FY25/26 EBITDA up to 15 per cent due to lower-than-expected M&H CV volumes and margins in H1 FY25.
Key risks: Less-than-anticipated growth in underlying segments; keener competition, adverse commodity movements.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.