Target: ₹210

CMP: ₹183.10

We interacted with the Pan India dealers of Ashok Leyland, and the overall dealer network is positive on the CV cycle, with the MHCV demand outlook still holding up while the slowdown in the LCV segment persists.

AL’s growth strategy is to penetrate the traditionally weak North and East regions, grow in the Central region and defend its market leadership in the Southern region.

AL had a lower market share of about 25 per cent in North and Eastern regions and 30 per cent+ in the Central region against the Southern region where it enjoyed 43% MS in FY23. Despite the seasonally weak monsoon period, the dealer feedback was positive on the MHCV sales outlook and the demand momentum is likely to increase in H2FY24.

It will be led by increased government spending on road construction and infrastructure activities.

AL remains well-positioned to benefit from a longish CV upcycle. We remain positive on the long-term growth trajectory of the company with better margins led by operational efficiencies, material cost reduction program, softening of commodity costs, and pricing discipline, and expect 8 per cent CAGR volume growth over FY23-26.

We forecast the company to post Revenue/EBITDA/PAT growth of 11/22/34 per cent CAGR over FY23-26.