Hold Ashok Leyland; target of Rs 100: ICICI Direct
ICICI Direct’s research report on Ashok Leyland
Ashok Leyland (ALL) reported a steady Q4FY19 performance. Revenues came in at Rs 8,846 crore (up 0.8% YoY), with total CV sales volume at 59,521 units (up 1.3% YoY; M&HCV down 0.9% YoY & LCV up 8.3 % YoY). ASP was at Rs 14.86 lakh/unit. Reported EBITDA was at Rs 985 crore, down 4.6% YoY with margins at 11.1%. Consequently, PAT for the quarter came in at Rs 653 crore. ALL declared a final dividend of Rs 3.1/share for FY19.
ALL will be a key beneficiary of infrastructure spend by the central government (roads, metro, airports, etc) and deserves to be in one’s portfolio given net debt free B/S and healthy return ratios profile (RoCE >25%). For ALL, we factor in 6% volume CAGR, with consequent net sales CAGR at 11% in FY19-21E. PAT CAGR, however, is expected to be flat primarily tracking lower effective tax rate in FY19P (20.6%). We value the stock at Rs 100 using SOTP valuation methodology valuing core CV business at 7.0x EV/EBITDA on FY21E numbers. We have a HOLD rating on the stock.
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