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Motilal Oswal
Ashok Leyland (Buy)
CMP: ₹32.75
Target: ₹45
Net sales of Ashok Leyland (AL) grew 4.8 per cent y-o-y to ₹2,480 crore (estimate ₹2,260 crore) led by volume decline of 8 per cent, while realisations rose 14 per cent y-o-y (up 5 per cent q-o-q) driven by mix change and 2 per cent price hike effective April. Lower raw material cost at 73.3 per cent (est 76 per cent; down 200 bps q-o-q) led to EBTIDA margins beat at 4.7 per cent (est 1.9 per cent; 370 bps y-o-y, down 130 bps q-o-q). Higher-than-expected operational performance led to lower net loss at ₹47.9 crore (est ₹130 crore). AL raised ₹670 crore through QIP at ₹36/share (7 per cent dilution). Our industry interaction indicates that MHCV cycle is bottoming-out. Typically, MHCV demand rebounds sharply with economic recovery. AL is best placed among CV OEMs to play the CV upcycle.
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